##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number: 333-169979
 Zayo Group, LLC
  DELAWARE
    
    26-2012549(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 400 Centennial Parkway, Suite 200,
Louisville, CO 80027
(Address of Principal Executive Offices)
 (303) 381-4683
(Registrants Telephone Number, Including Area Code)
   Yes o No þ
 Yes þ No o
 o þ
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a small reporting company)
 Yes o No þ




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##### 



TABLE OF CONTENTS
 INDEX
 PART I.Item 1. BUSINESS
    
    
    1Item 1A. RISK FACTORS
    
    
    12Item 1B. UNRESOLVED STAFF COMMENTS
    
    
    20Item 2. PROPERTIES
    
    
    21Item 3. LEGAL PROCEEDINGS
    
    
    21Item 4. RESERVED
    
    
    21PART II.Item 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    22Item 6. SELECTED FINANCIAL DATA
    
    
    23Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
    
    
    25Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    46Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    46Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
    
    
    46Item 9A. CONTROLS AND PROCEDURES
    
    
    47Item 9B OTHER INFORMATION
    
    
    47PART III.Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
    
    
    48Item 11. EXECUTIVE COMPENSATION
    
    
    51Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
    
    
    60Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    62Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    64PART IV.Item 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    65SIGNATURESExhibit 10.36Exhibit 10.37Exhibit 10.38Exhibit 10.39Exhibit 10.40Exhibit 10.41Exhibit 10.42Exhibit 12.1Exhibit 21.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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GLOSSARY OF TERMS
  4G
 ADM
 Backbone
 Bandwidth Infrastructure
 Capacity
        Carrier
 Carrier Hotel
 CATV
 CDN
 Central Office
 CLEC




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Cloud Computing
 Colocation
 Conduit
 Data center
 Dark-Fiber
 DS
 DWDM
 Ethernet
 Fiber Optics
 Gbps
 HDTV
 ILEC
 Interconnection Service
 IP
 ISP
 IXC
 Lateral/Spur
 Local Loop




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LTE Network
 Mbps
 Meet-Me Room
 Mobile Switching Centers
 MPLS
 Multiplexing
 NOC
 OC
 Optronics
 POP
 PRI
 Private Line
 RLEC
 Route Miles
 SONET
 Streaming
 Switch
 Transport
 VPN
 Wavelength
 WiMax




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##### Table of Contents



PART I
 
 ITEM 1.
    
    BUSINESS
 Overview
    
    
    PPL Telecom, LLC. We acquired PPL Telecom on August 24, 2007 for $56.7 million. PPL
Telecoms businesses and assets are primarily deployed in our Zayo Bandwidth business unit.
 
    
    Onvoy, Inc(Onvoy). We acquired Onvoy on November 7, 2007, for $77.2 million. The
business and the assets that we acquired when we purchased Onvoy were divided into the Zayo
Bandwidth (ZB), ZEN and OVS business units. On March 12, 2010, we distributed all of the
shares of common stock of Onvoy, which holds the OVS business unit, to Zayo Group Holdings,
Inc. (Holdings), our current direct shareholder. On April 1, 2011, we distributed all of
the assets and liabilities of the ZEN unit to Holdings. See Item 7: Managements
Discussion and Analysis of Results of Operations and Financial Condition  Factors
Affecting Our Results of Operations Spin-Off of Business Units.
 
    
    Citynet Fiber Networks, LLC. We acquired Citynet Fiber Networks on February 15, 2008,
for $102.2 million. Citynet Fiber Networks assets are deployed in the ZB business unit.
 
    
    FiberNet Telecom Group, Inc(FiberNet). We acquired FiberNet on September 9, 2009,
for $104.1 million. We formed our zColo business unit from a portion of the legacy FiberNet
assets. The remaining FiberNet assets were contributed to our ZB business unit.
  1




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
    
    AGL Networks, LLC(AGL Networks). We acquired AGL Networks on July 1, 2010, for
approximately $73.7 million. The business and the assets that we acquired with AGL were
used to establish the new Zayo Fiber Solutions (ZFS) business unit.
 
    
    American Fiber Systems Holdings Corporation(AFS). We acquired AFS on October 1, 2010
for $114.1 million. The business and the assets were contributed to the ZB and ZFS business
units.
    Our Business Strategy
  Selectively Expand Through Acquisitions
 Specifically Focus on Bandwidth Infrastructure and Colocation Services
 Leverage Our Extensive Infrastructure Asset Base by Targeting Customers Within Our Network
Footprint
 Continue to Expand and Leverage Our Fiber-to-the-Tower Footprint
  2




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Maintain a Disciplined Approach to Capital Investments
 Our Business Units
   Zayo Bandwidth.
 zColo.
 Zayo Fiber Solutions.
   3




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Business Unit
    
    Key Services
    
    Target Customers
    
    Peer GroupZayo Bandwidth
    
         bandwidth
infrastructure, including lit services
such as private lines, wavelengths, and
Ethernet
    
         Top 200
bandwidth users in the
United States (wireless,
carriers/local exchange
carriers, media and
content companies)
    
         AboveNet,
Inc.
     Sidera
Networks (formerly RCN
Metro)ZColo
    
         Network-neutral
colocation
     Interconnection
    
         Carriers,
service providers,
colocation-intensive
enterprises
    
         The Telx
Group, Inc.
     Equinix,
IncZayo Fiber 
Solutions
    
         Bandwidth
infrastructure, primarily dark-fiber
leases
    
         Carriers,
media and content
companies, large
enterprises and public
sector
    
         AboveNet,
Inc.
     Fibertech
Networks, LLC
  Industry
  
    
    Enablers of Infrastructure.Entities that approve, sell, or provide the licenses,
rights-of-way, and other necessary permits and land that are required in order to provide
telecom and Internet infrastructure services.
 
    
    Telecom and Internet Infrastructure Service Providers. Companies that own and operate
assets that are used to provide (i) raw bandwidth services, including bandwidth
infrastructure, that are used to transport wireless, data, voice, Internet and video
traffic using fiber, legacy copper, or microwave networks, (ii) colocation services used to
house and interconnect networks, and (iii) cellular tower services to Communication Service
Providers. Telecom and Internet infrastructure service providers rely on enablers of
infrastructure to provide their services.
 
    
    Communications Service Providers. Companies that market and sell communications
services such as voice, Internet, data, video, wireless, CDN services, and hosting
solutions. Telecom and Internet infrastructure services are used by nearly all
communications service providers in the provision of services such as Internet
connectivity, wireless voice and data services, content delivery, and voice and data
networks to end users.
 
    
    End Users: Public sector entities, businesses, and private consumers that purchase
communications services.
  4




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
    
    Bandwidth Infrastructure. Bandwidth infrastructure providers transport communications
services, such as wireless, data, voice, Internet and video traffic over fiber networks.
Bandwidth infrastructure providers supply lit bandwidth and/or dark fiber between
locations, such as cellular towers, neutral and network-specific data centers, carrier
hotels, mobile switching centers, CATV head ends and satellite uplink sites, ILEC central
offices, and other key buildings that house telecommunications and computer equipment.
Bandwidth infrastructure services (including fiber-to-the-tower) primarily consist of
private line, Ethernet and Wavelength services commonly referred to as lit services,
bandwidth infrastructure services that are not lit are sold as dark-fiber capacity.
 
    
    Colocation. Colocation providers offer a highly controlled environment for housing
telecommunications, Internet and other networking and computer equipment such as switches,
routers, transport equipment, servers and storage devices within their own colocation
facilities. Network-neutral data center providers allow customers who colocate in their
facilities to purchase bandwidth infrastructure and other telecommunications services from
third parties. This enables customers to interconnect with other customers colocated at the
same facility and/or with bandwidth infrastructure providers of their choice.
Network-specific data center providers require their customers to purchase bandwidth
infrastructure and other telecommunications services from them.
     Our Telecom and Internet Infrastructure Assets
   5




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Networks
  
    
    Modern Fiber and Optronics. Our modern fiber networks support current generation
optronics as well as Dense Wave Division Multiplex (DWDM) systems, Add Drop Multiplexing
(ADM) systems, and Ethernet switches. This equipment is used to provide our lit bandwidth
infrastructure services. The vast majority of our networks are capable of supporting next
generation technologies with minimal capital investment.
 
    
    Scalable Network Architecture. Our networks are scalable, meaning we have spare fiber
that will allow us to continue to add additional capacity to our network as demand for our
services increases. In addition, many of our core network technologies utilize DWDM
systems, nearly all of which have spare capacity whereby we can continue to add wavelengths
to our network without consuming additional fiber.
 
    
    Extensive Coverage in Locations with Few Fiber Alternatives. We focus our sales and
marketing efforts within our network footprint, specifically those areas within our
networks (including our fiber-to-the-tower networks) that we believe are less competitive.
A significant portion of our revenue is derived from small and midsized markets and from
our fiber-to-the-tower network that, in general, have a limited number of fiber
alternatives. We frequently connect customer locations in our target small to midsized
markets back to major data centers, carrier hotels and central offices, single-tenant
high-bandwidth locations, enterprise buildings and other major telecommunications buildings
that are usually located in larger markets. We also target locations in larger markets with
few fiber alternatives such as cellular towers and enterprise buildings.
 Regional Fiber Networks
 Fiber-to-the-Tower Networks
   6




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Diverse Portfolio of On-Net Buildings
 
    
    Data Centers, Carrier Hotels and Central Offices. These buildings house multiple
consumers of bandwidth infrastructure services. Our networks generally connect the most
important of these buildings in the markets where we operate. We have 340 of these types of
facilities connected to our network.
 
    
    Single-Tenant, High-Bandwidth Locations. These buildings house a single large consumer
of bandwidth infrastructure services. Examples of these buildings include video aggregation
sites, mobile switching centers and hosting centers. Our network is connected to these
buildings only when the tenant purchases services from us. We currently have 345
single-tenant, high-bandwidth locations on-net.
 
    
    Cellular Towers. We connect to cellular towers and other locations that house wireless
antennas. We have 1,978 cellular towers on-net, and we are actively constructing an
additional 500. We have signed contracts to provide service to at least one tenant at each
tower that we connect or will connect to. Typically, towers have multiple tenants, which
provide us with the opportunity to sell services to those additional tenants.
 
    
    Enterprise Buildings. Our network extends to 1,653 enterprise buildings. These
buildings contain a mix of single tenant and multi-tenant enterprise buildings and include
hospitals, corporate data centers, schools, government buildings, research centers and
other key corporate locations that require bandwidth infrastructure services.
 Key Colocation Facilities Exclusively in Major Telecom/Internet Buildings
  Network Management and Operations
  Rights-of-Way
   7




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Other
  Our Services
 Zayo Bandwidth
   
    
    avoidance of the cost of third-party service providers, including ILECs;
 
    
    the ability to rapidly and cost effectively scale, or increase bandwidth, to meet the
growing network requirements of our customers; and
 
    
    ease in identifying and responding to customer service inquiries over one contiguous
fiber network.
  zColo
 Colocation Services
 
    
    Space. We sell cabinets, racks, half-racks and cages. We also provide and charge for
remote hands/remote technician services.
 
    
    Power. We provide alternating current (AC) and direct current (DC) power at
various levels. Our power product is backed up by batteries and generators.
  8




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
    
    Interconnection Services. As a network-neutral provider of colocation services, we
provide our customers with interconnection services including fiber, OCn, DS3 and DS1
service levels. These services are provided for terms between one and five years for a
recurring fee and in many cases a non-recurring fee. Interconnection services allow
customers to connect and deliver capacity services between separate networks.
 Zayo Fiber Solutions
 
    
    Dark-Fiber Leases. We provide our customers the opportunity to lease dark-fiber,
usually in pairs, for a monthly recurring fee or upfront payment. Contracts are
generally long-term (up to 20 years and in a few cases longer) and sometimes include
automatic annual price escalators.
 
    
    Maintenance & Other Services. Dark-fiber leases also include maintenance
services for which Zayo charges customers on a recurring basis. Other related
services may include building entrance fiber or riser fiber for distribution within
a building.
  Sales and Marketing
        9




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Our Customers
    Competition
 Bandwidth Infrastructure
  Colocation
   10




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Regulatory Matters
   Website Access and Important Investor Information
 www.zayo.com www.zayo.com/investor-center
 http://investor.zayo.com/corporate-governance
 Special Note Regarding Forward-Looking Statements
   11




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ITEM 1A.
    
    RISK FACTORS
  We have a Limited Operating History as a Consolidated Entity.
   Future Acquisitions are a Component of Our Strategic Plan, and will Include Integration and Other
Risks That could Harm Our Business.
   
    
    increased demand on our existing employees and management related to the increase in the
size of the business and the possible distraction from our existing business due to the
acquisition, particularly with respect to businesses acquired by our sister companies or
parent;
 
    
    loss of key employees and sales people of the acquired business;
 
    
    liabilities of the acquired business, both unknown and known at the time of the
consummation of the acquisition;
 
    
    agreeing to buy a business before we have obtained its audited financial statements and
subsequently discovering that the unaudited financial statements we relied on were
incorrect;
 
    
    expenses associated with the integration of the operations of the acquired business;
 
    
    the possibility of future impairment, write-downs of goodwill and other intangibles
associated with the acquired business;
 
    
    that the services and operations of the acquired business do not meet the level of
quality of those of our existing services and operations; and
 
    
    that the internal controls of the acquired business are inadequate.
  12




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Our Debt Level could Negatively Impact Our Financial Condition, Results of Operations and
Business Prospects and Prevent us From Fulfilling Our Debt Obligations. In the Future, We may
Incur Substantially More Indebtedness, Which could Further Increase the Risks Associated With Our
Leverage.
   
    
    making it more difficult for us to satisfy our obligations under our debt agreements;
 
    
    requiring us to dedicate a substantial portion of our cash flow from operations to
required payments on debt, thereby reducing the availability of cash flow for working
capital, capital expenditures and other general business activities;
 
    
    limiting our ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions and general corporate and other activities;
 
    
    limiting our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate;
 
    
    increasing our vulnerability to both general and industry-specific adverse economic
conditions;
 
    
    placing us at a competitive disadvantage relative to less leveraged competitors; and
 
    
    preventing us from raising the funds necessary to repurchase the notes tendered to us
upon the occurrence of certain changes of control, which would constitute a default under
the indenture governing our notes.
 We may not be Able to Generate Enough Cash Flow to Meet Our Debt Obligations.
    13




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
    
    reducing or delaying capital investments;
    
    raising additional capital;
    
    refinancing or restructuring our debt; and
    
    selling assets.
   Since Our Inception We have Used More Cash Than We have Generated From Operations and We Expect
to Continue to do so in the Next Several Quarters.
   We Incurred Net Losses in the Current and Prior Periods and We Cannot Guarantee That We will
Generate Net Income in the Future.
    14




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We are Experiencing Rapid Growth of Our Business and Operations and We may not be Able to
Efficiently Manage Our Growth.
  
    
    expand, develop and retain an effective sales force and other qualified personnel;
    
    maintain the quality of our operations and our service offerings;
    
    maintain and enhance our system of internal controls to ensure timely and accurate
reporting; and
    
    expand our operational information systems in order to support our growth.
  Our Back Office Infrastructure, Including the Operational Support Systems, Processes and People,
is a Key Component to Providing a Good Experience to Our Customers, the Failure of Which could
Impair Our Ability to Retain Customers or Attract New Customers.
  Our Ability to Provide Services would be Hindered if Any of Our Franchises, Licenses, Permits,
Rights-of-Way, Conduit Leases, Fiber Agreements, or Property Leases are Canceled or Not Renewed.
  
    
    increased costs as a result of renewing the IRU under less favorable terms;
    
    significant capital expenditures in order to build replacement fiber;
    
    increased costs as a result of entering into short-term leases for lit services; and
    
    lost revenue resulting from our inability to provide certain services.
   15




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If Our Contracts With Our Customers are Not Renewed or are Terminated, Our Business could be
Substantially Harmed.
   Our Revenue is Relatively Concentrated Among a Small Number of Customers and the Loss of any of
These Customers could Significantly Harm Our Business, Financial Condition and Results of
Operations.
  Service Level Agreements in Our Customer Agreements could Subject us to Liability or the Loss of
Revenue.
  We are Required to Maintain, Repair, Upgrade and Replace Our Network and Our Facilities, and Our
Failure to do so could Harm Our Business.
   16




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Any Failure of Our Physical Infrastructure, Services or Other Physical Assets could Lead to
Significant Costs and Disruptions That could Reduce Our Revenues, Harm Our Business Reputation,
and have a Material Adverse Effect on Our Financial Results.
  
    
    human error;
    
    power loss;
    
    improper building maintenance by the landlords of the buildings in which our data centers
are located;
    
    physical or electronic security breaches;
    
    fire, earthquake, hurricane, flood, and other natural disasters;
    
    water damage;
    
    the effect of war, terrorism, and any related conflicts or similar events worldwide; and
    
    sabotage and vandalism.
  We do not Own the Buildings in Which Our Data Centers are Located. Instead, We Lease Our Data
Center Space, and the non-Renewal of Leases could be a Significant Risk to Our Ongoing
Operations.
  We may be Unable to Expand Our Existing Data Centers or Locate and Secure Suitable Sites for
Additional Data Centers.
   17




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We may not be Able to Obtain or Construct Additional Laterals to Connect New Buildings to Our
Network.
  Our Services have a Long Sales Cycle, Which May Have a Material Adverse Effect on Our Business,
Financial Condition, and Results of Operations.
  We are Highly Dependent on Our Management Team and Other Key Employees.
  Our Future Tax Liabilities are not Predictable or Controllable. If We Become Subject to Increased
Levels of Taxation, Our Financial Condition and Operations could be Negatively Impacted.
  Risks Relating to Our Industry
 The Telecommunications Industry is Highly Competitive, and Contains Competitors That have
Significantly Greater Resources and a More Diversified Base of Existing Customers Than We do.
   18




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
    
    consolidation in the industry, leading to larger competitors with more expansive
networks;
    
    a competitor building new fiber networks;
    
    the creation of new competitive technology for transport services;
    
    further technological advances; and
    
    further deregulation and other regulatory initiatives.
  If We do not Adapt to Swift Changes in the Telecommunications Industry, We could Lose Customers
or Market Share.
   We are Subject to Significant Regulation that could Change or Otherwise Impact us in an Adverse
Manner.
  Unfavorable General Economic Conditions in the United States could Negatively Impact Our
Operating Results and Financial Condition.
   19




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Disruptions in the Financial Markets could Affect Our Ability to Obtain Debt or Equity Financing
or to Refinance Our Existing Indebtedness on Reasonable Terms (or at All).
  Terrorism and Natural Disasters could Adversely Impact Our Business.
  Changes in Regulations Affecting Commercial Power Providers may Increase Our Costs.
  Consolidation Among Companies in the Telecommunications Industry could Adversely Impact our
Business
  
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
   20




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ITEM 2.
    
    PROPERTIES
 Our Telecom and
Infrastructure Assets
   
 ITEM 3.
    
    LEGAL PROCEEDINGS
  
 ITEM 4.
    
    RESERVED
  21




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Holders of Our Common Stock
  Dividend Policy
  Issuer Purchases of Equity Securities
   22




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##### Table of Contents



ITEM 6.
    
    SELECTED FINANCIAL DATA
   Year Ended June 30,2011
    
    
    2010
    
    
    2009
    
    
    2008(in thousands)Consolidated Statements of Operations Data:Revenue
    
    $
    287,235
    
    
    $
    199,330
    
    
    $
    125,339
    
    
    $
    64,623Operating costs and expenses:Operating costs, excluding depreciation and amortization
    
    
    71,528
    
    
    
    62,688
    
    
    
    37,792
    
    
    
    18,693Selling, general and administrative expenses
    
    
    89,846
    
    
    
    65,911
    
    
    
    51,493
    
    
    
    30,342Stock-based compensation
    
    
    24,310
    
    
    
    18,168
    
    
    
    6,412
    
    
    
    3,381Depreciation and amortization
    
    
    60,463
    
    
    
    38,738
    
    
    
    26,554
    
    
    
    10,374Total operating costs and expenses
    
    
    246,147
    
    
    
    185,505
    
    
    
    122,251
    
    
    
    62,790Operating income
    
    
    41,088
    
    
    
    13,825
    
    
    
    3,088
    
    
    
    1,833Other income (expense):Interest expense
    
    
    (33,414
    )
    
    
    (18,692
    )
    
    
    (15,245
    )
    
    
    (6,287
    )Other (expense)/ income
    
    
    (126
    )
    
    
    1,526
    
    
    
    234
    
    
    
    351Gain on bargain purchase
    
    
    
    
    
    
    9,081
    
    
    
    
    
    
    
    Loss on extinguishment of debt
    
    
    
    
    
    
    (5,881
    )
    
    
    
    
    
    
    Total other expenses, net
    
    
    (33,540
    )
    
    
    (13,966
    )
    
    
    (15,011
    )
    
    
    (5,936
    )Earnings/(loss) from continuing operations before income taxes
    
    
    7,548
    
    
    
    (141
    )
    
    
    (11,923
    )
    
    
    (4,103
    )Provision/(benefit) for income taxes
    
    
    12,542
    
    
    
    4,823
    
    
    
    (2,321
    )
    
    
    (469
    )Loss from continuing operations
    
    
    (4,994
    )
    
    
    (4,964
    )
    
    
    (9,602
    )
    
    
    (3,634
    )Earnings from discontinued operations, net of income taxes
    
    
    899
    
    
    
    5,425
    
    
    
    7,355
    
    
    
    1,681Net (loss)/earnings
    
    $
    (4,095
    )
    
    $
    461
    
    
    $
    (2,247
    )
    
    $
    (1,953
    )
  23




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Zayo Group, LLC (Historical)Year Ended June 30,2011
    
    
    2010
    
    
    2009
    
    
    2008(in thousands)Consolidated Balance Sheet Data (at period end):Cash and cash equivalents
    
    $
    25,394
    
    
    $
    87,864
    
    
    $
    38,019
    
    
    $
    4,390Property and equipment, net
    
    
    518,513
    
    
    
    297,889
    
    
    
    211,864
    
    
    
    161,134Total assets
    
    
    789,261
    
    
    
    565,840
    
    
    
    422,162
    
    
    
    339,439Long-term debt and capital lease obligations, including current portion
    
    
    365,588
    
    
    
    259,786
    
    
    
    151,488
    
    
    
    115,720Total members equity
    
    
    237,345
    
    
    
    213,136
    
    
    
    212,963
    
    
    
    177,671Other Financial Data:EBITDA(1), from continuing operations
    
    
    101,425
    
    
    
    57,289
    
    
    
    29,876
    
    
    
    12,558Adjusted EBITDA(1), from continuing operations
    
    
    126,600
    
    
    
    73,556
    
    
    
    37,007
    
    
    
    15,939Total capital expenditures, net of stimulus grants  continuing operations
    
    
    112,524
    
    
    
    58,751
    
    
    
    61,614
    
    
    
    22,729Reconciliation of EBITDA and Adjusted EBITDA:Loss from continuing operations
    
    $
    (4,994
    )
    
    $
    (4,964
    )
    
    $
    (9,602
    )
    
    $
    (3,634
    )Add back non-EBITDA items included in loss from continuing operations:Depreciation and amortization
    
    
    60,463
    
    
    
    38,738
    
    
    
    26,554
    
    
    
    10,374Interest expense (excluding loss on extinguishment of debt)
    
    
    33,414
    
    
    
    18,692
    
    
    
    15,245
    
    
    
    6,287Provision/(benefit) for income taxes
    
    
    12,542
    
    
    
    4,823
    
    
    
    (2,321
    )
    
    
    (469
    )EBITDA, from continuing operations
    
    
    101,425
    
    
    
    57,289
    
    
    
    29,876
    
    
    
    12,558Stock-based compensation
    
    
    24,310
    
    
    
    18,168
    
    
    
    6,412
    
    
    
    3,381Gain on bargain purchase
    
    
    
    
    
    
    (9,081
    )
    
    
    
    
    
    
    Loss on extinguishment of debt
    
    
    
    
    
    
    5,881
    
    
    
    
    
    
    
    Transaction costs related to acquisitions
    
    
    865
    
    
    
    1,299
    
    
    
    719
    
    
    
    Adjusted EBITDA, from continuing operations
    
    $
    126,600
    
    
    $
    73,556
    
    
    $
    37,007
    
    
    $
    15,939
 (1)
    
    EBITDA and Adjusted EBITDA are not financial measurements prepared in accordance with generally
accepted accounting principles in the United States (GAAP). The above table sets forth, for the periods indicated,
a reconciliation of EBITDA and Adjusted EBITDA to loss from continuing operations, as loss from continuing operations
is calculated in accordance with GAAP. We define Adjusted EBITDA as earnings before interest, income taxes,
depreciation and amortization (EBITDA) adjusted to exclude transaction costs, stock-based compensation, and certain
non-cash items.  24




---



##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    Overview
 Introduction
   Our Business Units
   25




---



##### Table of Contents



Recent Developments
 Acquisition of AGL Networks
   Merger with American Fiber Systems Holding Corporation
  Acquisition of Dolphini Assets
  Broadband Stimulus Awards
  
    
    In February 2010, ZB, as the direct recipient, was awarded $25.1 million in funding to
construct 626 miles of fiber network connecting 21 community colleges in Indiana. The
total project involves approximately $31.4 million of capital expenditures of which $6.3
million is anticipated to be funded by the Company.
  26




---



##### Table of Contents




    
    In July 2010, ZB, as the direct recipient, was awarded a $13.4 million grant to
construct 286 miles of fiber network in Anoka County, Minnesota, outside of Minneapolis.
The total project involves approximately $19.2 million of capital expenditures of which
$5.7 million is anticipated to be funded by the Company.
  Factors Affecting Our Results of Operations
 Business Acquisitions
       27




---



##### Table of Contents



Acquisition
    
    Date
    
    Acquisition Cost(In thousands)Memphis Networx
    
    July 31, 2007
    
    $
    9,789PPL Telecom
    
    August 24, 2007
    
    
    56,734Indiana Fiber Works
    
    September 28, 2007
    
    
    23,134Onvoy
    
    November 7, 2007
    
    
    77,167Voicepipe
    
    November 7, 2007
    
    
    3,250Citynet Fiber Networks
    
    February 15, 2008
    
    
    102,183Northwest Telephone
    
    May 30, 2008
    
    
    6,897CenturyTel Tri-State Markets
    
    July 22, 2008
    
    
    2,700Columbia Fiber Solutions
    
    September 30, 2008
    
    
    12,161CityNet Holdings Assets
    
    September 30, 2008
    
    
    3,350Adesta Assets
    
    September 30, 2008
    
    
    6,430Northwest Telephone California
    
    May 26, 2009
    
    
    15FiberNet
    
    September 9, 2009
    
    
    104,083AGL Networks
    
    July 1, 2010
    
    
    73,666Dolphini Assets
    
    September 20, 2010
    
    
    235American Fiber Systems
    
    October 1, 2010
    
    
    114,500Lessportion of Onvoy costs related to OVS and ZEN
    
    
    
    
    
    
    (49,791
    )Total
    
    
    
    
    
    $
    546,503
  Spin-Off of Business Units
     28




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##### Table of Contents



Formation of the Zayo Fiber Solutions Business Unit
  Substantial Capital Expenditures
   Substantial Indebtedness
  Critical Accounting Policies and Estimates
   Revenue and trade receivables
   Property Plant and
Equipment: Real Estate Sales
  29




---



##### Table of Contents



Network Expenses and Accrued Liabilities
    Stock-Based Compensation
 Compensation: Stock Compensation
    30




---



##### Table of Contents



31




---



##### Table of Contents



Common Units
    
    2011
    
    
    2010
    
    
    2009Class A
    
    $
    0.81
    
    
    $
    0.49
    
    
    $
    0.16Class B
    
    $
    0.58
    
    
    $
    0.28
    
    
    
    n/aClass C
    
    $
    0.33
    
    
    $
    0.03
    
    
    
    n/aClass D
    
    $
    0.31
    
    
    
    n/a
    
    
    
    n/aClass E
    
    $
    0.23
    
    
    
    n/a
    
    
    
    n/a
  Property and Equipment
 .
  Land
    
    
    N/ABuildings improvements and site improvements
    
    8 to15Furniture, fixtures and office equipment
    
    
    3 to 7Computer hardware
    
    
    2 to 5Software
    
    
    2 to 3Machinery and equipment
    
    
    3 to 7Fiber optic equipment
    
    
    4 to 8Circuit switch equipment
    
    
    10Packet switch equipment
    
    
    3 to 5Fiber optic network
    
    
    8 to 20Construction in progress
    
    
    N/A
  32




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##### Table of Contents



Deferred Tax Accounting
    Net Operating Loss Carryovers Following Changes in
Ownership
  33




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##### Table of Contents



Goodwill and Purchased Intangibles
     
    
    the development of projected free cash flows;
    
    the estimation of an appropriate risk adjusted present value discount rate;
    
    the calculation of the present value of projected free cash flow; and
    
    the calculation of a terminal value.
  34




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##### Table of Contents




    
    identification and selection of a group of acceptable and relevant guideline
companies;
    
    selection of financial ratios and time period most appropriate for the
analysis;
    
    financial adjustments made to both or either of the guideline and/or subject
companies to make the underlying financial figures comparable.
    
    subjective discounts or premiums to implied ratios to account for
observations relating to substantial differences that would be perceived as having an
impact on value between the collective guideline companies and us; and
    
    selection of a statistical midpoint or range within the dataset most
appropriate for the analysis.
   Acquisitions  Purchase Price Allocation
     35




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Background for Review of Our Results of Operations
 Operating Costs
   Selling, General and Administrative Expenses
   Year Ended June 30, 2011 Compared to the Year Ended June 30, 2010
 Revenue
  Year ended June 30,2011
    
    
    2010(In thousands)Revenue:Zayo Bandwidth
    
    $
    214,110
    
    
    
    75
    %
    
    $
    183,085
    
    
    
    92
    %Zayo Fiber Solutions
    
    
    44,549
    
    
    
    15
    
    
    
    
    
    
    
    zColo
    
    
    33,899
    
    
    
    12
    
    
    
    23,993
    
    
    
    12Intercompany
    
    
    (5,323
    )
    
    
    (2
    )
    
    
    (7,748
    )
    
    
    (4
    )Total revenue
    
    
    287,235
    
    
    
    100
    %
    
    
    199,330
    
    
    
    100
    %
   36




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##### Table of Contents



Year endedJune 30,2011
    
    
    2010(in thousands)Monthly recurring revenue
    
    $
    274,262
    
    
    
    96
    %
    
    $
    194,383
    
    
    
    97
    %Amortization of deferred revenue
    
    
    8,976
    
    
    
    3
    
    
    
    3,500
    
    
    
    2Other revenue
    
    
    3,997
    
    
    
    1
    
    
    
    1,447
    
    
    
    1Total
    
    $
    287,235
    
    
    
    100
    %
    
    $
    199,330
    
    
    
    100
    %
 Zayo Bandwidth.
 zColo.
 Zayo Fiber Solutions
 Operating Costs, Excluding Depreciation and Amortization
   37




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##### Table of Contents



Selling, General and Administrative Expenses:
  Year endedJune 30,2011
    
    
    2010(In thousands)Compensation and benefits expenses
    
    $
    39,657
    
    
    $
    31,047Network operations expenses
    
    
    27,569
    
    
    
    19,892Other SG&A expenses
    
    
    21,755
    
    
    
    13,673Transaction costs
    
    
    865
    
    
    
    1,299Total SG&A expenses
    
    $
    89,846
    
    
    $
    65,911
 Compensation and Benefits Expenses.
 Network Operations Expenses.
 Other SG&A.
 Stock-Based Compensation
  Depreciation and Amortization
  Interest Expense
   38




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Provision for Income Taxes
  Year endedJune 30,2011
    
    
    2010(In thousands)Expected provision at statutory rate of 34 percent
    
    $
    2,566
    
    
    $
    (48
    )Increase/(decrease) due to:Non-deductible stock-based compensation
    
    
    7,824
    
    
    
    6,177State income taxes, net of federal benefit
    
    
    1,564
    
    
    
    786Transaction costs not deductible
    
    
    294
    
    
    
    385Gain on bargain purchase
    
    
    
    
    
    
    (3,078
    )Other, net
    
    
    294
    
    
    
    601Provision for income taxes
    
    $
    12,542
    
    
    $
    4,823
 Year Ended June 30, 2010 Compared to the Year Ended June 30, 2009
 Revenue
  Year ended June 30,2010
    
    
    2009(In thousands)Revenue:Zayo Bandwidth
    
    $
    183,085
    
    
    
    92
    %
    
    $
    129,282
    
    
    
    103
    %Zayo Fiber Solutions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    zColo
    
    
    23,993
    
    
    
    12
    
    
    
    
    
    
    
    Intercompany
    
    
    (7,748
    )
    
    
    (4
    )
    
    
    (3,943
    )
    
    
    (3
    )Total revenue
    
    
    199,330
    
    
    
    100
    %
    
    
    125,339
    
    
    
    100
    %
   39




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##### Table of Contents



Year endedJune 30,2010
    
    
    2009(in thousands)Monthly recurring revenue
    
    $
    194,383
    
    
    
    97
    %
    
    $
    120,412
    
    
    
    96
    %Amortization of deferred revenue
    
    
    3,500
    
    
    
    2
    
    
    
    2,011
    
    
    
    2Other revenue
    
    
    1,447
    
    
    
    1
    
    
    
    2,916
    
    
    
    2Total
    
    $
    199,330
    
    
    
    100
    %
    
    $
    125,339
    
    
    
    100
    %
 Zayo Bandwidth.
 zColo.
 Operating Costs, Excluding Depreciation and Amortization
 Operating Costs, Excluding Depreciation and Amortization.
 Selling, General and Administrative Expenses
  Year endedJune 30,2010
    
    
    2009(In thousands)Compensation and benefits expenses
    
    $
    31,047
    
    
    $
    21,527Network operation expenses
    
    
    19,892
    
    
    
    17,277Other SG&A expenses
    
    
    13,673
    
    
    
    11,970Transaction costs
    
    
    1,299
    
    
    
    719Total SG&A expenses
    
    $
    65,911
    
    
    $
    51,493
 Compensation and Benefits Expenses.
 Network Operations Expenses.
 Other SG&A.
  40




---



##### Table of Contents



Transaction Costs.
 Stock-Based Compensation
  Depreciation and Amortization
  Total Other Expense, Net
  Year Ended June 302010
    
    
    2009(in thousands)Interest expense
    
    $
    (18,692
    )
    
    $
    (15,245
    )Interest income
    
    
    10
    
    
    
    186Other income, net
    
    
    1,516
    
    
    
    48Non-taxable gain on bargain purchase
    
    
    9,081
    
    
    
    Loss on extinguishment of debt
    
    
    (5,881
    )
    
    
    Total other expenses, net
    
    $
    (13,966
    )
    
    $
    (15,011
    )
 Interest Expense.
 Other Income.
 Loss on Extinguishment of Debt:
  41




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##### Table of Contents



Provision for Income Taxes
  Year endedJune 30,2010
    
    
    2009(In thousands)Expected provision at statutory rate of 34 percent
    
    $
    (48
    )
    
    $
    (4,053
    )Increase/(decrease) due to:Non-deductible stock-based compensation
    
    
    6,177
    
    
    
    2,158State income taxes, net of federal benefit
    
    
    786
    
    
    
    (248
    )Transaction costs not deductible
    
    
    385
    
    
    
    Gain on bargain purchase
    
    
    (3,078
    )
    
    
    Other, net
    
    
    601
    
    
    
    (178
    )Provision for income taxes
    
    $
    4,823
    
    
    $
    (2,321
    )
 Adjusted EBITDA
    
    
    does not reflect capital expenditures, or future requirements for capital and major
maintenance expenditures or contractual commitments;
 
    
    does not reflect changes in, or cash requirements for, our working capital needs;
 
    
    does not reflect the significant interest expense, or the cash requirements necessary to
service the interest payments, on our debt; and
 
    
    does not reflect cash required to pay income taxes.
  42




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##### Table of Contents



Year ended June 30, 2011Zayo($ in millions)
    
    Bandwidth
    
    
    zColo
    
    
    ZFS
    
    
    Corporate
    
    
    Zayo GroupEarnings/(loss) from continuing operations
    
    $
    37.2
    
    
    $
    5.9
    
    
    $
    10.8
    
    
    $
    (58.9
    )
    
    $
    (5.0
    )Interest expense
    
    
    1.0
    
    
    
    0.2
    
    
    
    
    
    
    
    32.2
    
    
    
    33.4Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.5
    
    
    
    12.5Depreciation and amortization expense
    
    
    41.5
    
    
    
    5.4
    
    
    
    13.6
    
    
    
    
    
    
    
    60.5EBITDA
    
    
    79.7
    
    
    
    11.5
    
    
    
    24.4
    
    
    
    (14.2
    )
    
    
    101.4Transaction costs
    
    
    0.6
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    
    
    
    
    0.9Stock-based compensation
    
    
    9.2
    
    
    
    0.6
    
    
    
    1.9
    
    
    
    12.6
    
    
    
    24.3Adjusted EBITDA
    
    $
    89.5
    
    
    $
    12.2
    
    
    $
    26.5
    
    
    $
    (1.6
    )
    
    $
    126.6
 Year ended June 30, 2010Zayo($ in millions)
    
    Bandwidth
    
    
    zColo
    
    
    ZFS
    
    
    Corporate
    
    
    Zayo GroupEarnings/(loss) from continuing operations
    
    $
    26.6
    
    
    $
    4.2
    
    
    $
    
    
    
    $
    (35.8
    )
    
    $
    (5.0
    )Interest expense
    
    
    1.1
    
    
    
    0.2
    
    
    
    
    
    
    
    17.4
    
    
    
    18.7Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.8
    
    
    
    4.8Depreciation and amortization expense
    
    
    34.2
    
    
    
    4.5
    
    
    
    
    
    
    
    
    
    
    
    38.7EBITDA
    
    
    61.9
    
    
    
    8.9
    
    
    
    
    
    
    
    (13.6
    )
    
    
    57.2Transaction costs
    
    
    1.1
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    1.3Stock-based compensation
    
    
    6.6
    
    
    
    0.1
    
    
    
    
    
    
    
    11.5
    
    
    
    18.2Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.9
    
    
    
    5.9Gain on bargain purchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9.1
    )
    
    
    (9.1
    )Adjusted EBITDA
    
    $
    69.6
    
    
    $
    9.0
    
    
    $
    
    
    
    $
    (5.1
    )
    
    $
    73.6
 Year ended June 30, 2009Zayo($ in millions)
    
    Bandwidth
    
    
    zColo
    
    
    ZFS
    
    
    Corporate
    
    
    Zayo GroupEarnings/(loss) from continuing operations
    
    $
    15.3
    
    
    $
    
    
    
    $
    
    
    
    $
    (24.9
    )
    
    $
    (9.6
    )Interest expense
    
    
    1.2
    
    
    
    
    
    
    
    
    
    
    
    14.0
    
    
    
    15.2Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.3
    )
    
    
    (2.3
    )Depreciation and amortization expense
    
    
    26.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26.6EBITDA
    
    
    43.1
    
    
    
    
    
    
    
    
    
    
    
    (13.2
    )
    
    
    29.9Transaction costs
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7Stock-based compensation
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    4.2
    
    
    
    6.4Adjusted EBITDA
    
    $
    46.0
    
    
    $
    
    
    
    $
    
    
    
    $
    (9.0
    )
    
    $
    37.0
 Liquidity and Capital Resources
 Cash flows.
   43




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##### Table of Contents



Cash Flows
    Year ended June 30,2011
    
    
    2010
    
    
    2009(In thousands)Net cash provided by operating activities
    
    $
    97,054
    
    
    $
    58,200
    
    
    $
    24,667Net cash used in investing activities
    
    
    (296,162
    )
    
    
    (155,322
    )
    
    
    (73,122
    )Net cash provided by financing activities
    
    
    134,190
    
    
    
    135,446
    
    
    
    67,921
 Net Cash Flows from Operating Activities
    44




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##### Table of Contents



Cash Flows Used for Investing Activities
   Cash Flows from Financing Activities
   Contractual Cash Obligations
  Less
    
    
    
    
    
    
    
    
    
    
    MoreThan
    
    
    
    
    
    
    
    
    
    
    ThanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years(in thousands)Long-term debt (principal and interest)
    
    $
    559,286
    
    
    $
    35,875
    
    
    $
    76,250
    
    
    $
    71,750
    
    
    $
    375,411Operating leases
    
    
    178,799
    
    
    
    23,353
    
    
    
    40,511
    
    
    
    33,876
    
    
    
    81,059Purchase obligations
    
    
    22,822
    
    
    
    22,202
    
    
    
    620
    
    
    
    
    
    
    
    Capital leases (principal and interest)
    
    
    15,717
    
    
    
    1,769
    
    
    
    3,475
    
    
    
    3,175
    
    
    
    7,298Total
    
    $
    776,624
    
    
    $
    83,199
    
    
    $
    120,856
    
    
    $
    108,801
    
    
    $
    463,768
  Off-Balance Sheet Arrangements
  New Accounting Pronouncements
   45




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##### Table of Contents



ITEM 7A
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      
 ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
   46




---



##### Table of Contents



ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Managements Annual Report on Internal Control Over Financial Reporting
   
 ITEM 9B.  OTHER INFORMATION
   47




---



##### Table of Contents



PART III
 
 ITEM 10.
    
    DIRECTOR, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    
    PositionDaniel Caruso
    
    47
    
    
    President, Chief Executive Officer, and DirectorKenneth desGarennes
    
    40
    
    
    Chief Financial Officer and TreasurerScott Beer
    
    42
    
    
    General Counsel and SecretaryDavid Howson
    
    40
    
    
    President, Zayo BandwidthGlenn S. Russo
    
    52
    
    
    President, Zayo NetworksChris Morley
    
    37
    
    
    President, zColoMatthew Erickson
    
    34
    
    
    President, Zayo Fiber SolutionsRick Connor
    
    62
    
    
    Director, Compensation Committee Member and Audit Committee ChairmanMichael Choe
    
    39
    
    
    Director and Compensation Committee MemberJohn Siegel
    
    42
    
    
    Director and Audit Committee MemberGillis Cashman
    
    36
    
    
    Director and Audit Committee MemberJohn Downer
    
    53
    
    
    Director and Compensation Committee Member
 Management Team
      48




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##### Table of Contents



Directors
     49




---



##### Table of Contents



Departed Officers and Directors
   Committees of the Board
 Audit Committee
  Code of Ethics
 http://investor.zayo.com/corporate-governance
  50




---



##### Table of Contents



ITEM 11.
    
    EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis
  Compensation Objectives
  Elements of Executive Compensation
  Base Salary
  Non-Equity Incentive Compensation Plan
   51




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##### Table of Contents



Plan
    
    
    PlanTarget
    
    
    ActualName
    
    Payout
    
    
    PayoutDaniel Caruso
    
    $
    
    
    
    $
    Kenneth desGarennes
    
    $
    102,000
    
    
    $
    130,980David Howson
    
    $
    80,932
    
    
    $
    103,397Glenn Russo
    
    $
    105,000
    
    
    $
    76,875Marty Snella
    
    $
    93,500
    
    
    $
    108,625
   Equity
      52




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##### Table of Contents



Bonus
 Benefits
 Determination of Executive Compensation
   Employment and Equity Arrangements
  First vesting
    
    
    
    
    
    
    Grant date fairNamed executive/Equity class
    
    Units
    
    
    date
    
    
    Vesting End
    
    
    valueDaniel CarusoPreferred B
    
    
    970,000
    1
    
    
    10/31/2010
    
    
    
    10/31/2013
    
    
    $
    2.48Common D
    
    
    8,096,118
    2
    
    
    1/1/2011
    
    
    
    1/1/2014
    
    
    $
    0.00Common E
    
    
    2,007,425
    2
    
    
    5/20/2011
    
    
    
    5/20/2014
    
    
    $
    0.23Kenneth deGarennesCommon D
    
    
    5,152,075
    2
    
    
    1/1/2011
    
    
    
    1/1/2014
    
    
    $
    0.00Common E
    
    
    795,519
    2
    
    
    5/20/2011
    
    
    
    5/20/2014
    
    
    $
    0.23Glenn RussoCommon D
    
    
    110,000
    2
    
    
    1/1/2011
    
    
    
    1/1/2014
    
    
    $
    0.00Common E
    
    
    500,000
    2
    
    
    5/20/2011
    
    
    
    5/20/2014
    
    
    $
    0.23Marty SnellaCommon D
    
    
    1,840,027
    2
    
    
    1/1/2012
    
    
    
    1/1/2014
    
    
    $
    0.00David HowsonCommon B
    
    
    500,000
    3
    
    
    5/26/2011
    
    
    
    5/27/2014
    
    
    $
    0.33Common D
    
    
    2,145,027
    2
    
    
    1/1/2012
    
    
    
    1/1/2015
    
    
    $
    0.00
 1
    
    Mr. Carusos Preferred B shares vest ratably each quarter over a period of three
years.2
    
    Class D and E common units vest 33.33 percent on the first vesting date and the
remaining units vest pro-rata on a monthly basis over a period of two years after the first
vesting date.3
    
    Mr. Howsons Class B common units vest 33.33 percent on the first vesting date and the
remaining units vest pro-rata on a monthly basis over a period of two years after the first
vesting date.  53




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##### Table of Contents



Accelerated Vesting
   54




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##### Table of Contents



Summary Compensation Table
  Non-EquityIncentive PlanFiscal
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    CompensationName and Principal Position
    
    Year
    
    
    Salary ($)
    
    
    Bonus ($)
    
    
    Awards ($)(1)
    
    
    ($)(2)
    
    
    Total ($)Daniel Caruso
    
    
    2009
    
    
    
    10,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,951Chief Executive Officer
    
    
    2010
    
    
    
    10,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,9512011
    
    
    
    10,951
    
    
    
    
    
    
    
    2,867,308
    
    
    
    
    
    
    
    2,878,259Kenneth desGarennes
    
    
    2009
    
    
    
    210,000
    
    
    
    
    
    
    
    
    
    
    
    68,250
    
    
    
    278,250Chief Financial Officer
    
    
    2010
    
    
    
    225,000
    
    
    
    
    
    
    
    
    
    
    
    122,880
    
    
    
    347,8802011
    
    
    
    240,000
    
    
    
    
    
    
    
    182,969
    
    
    
    130,980
    
    
    
    553,949David Howson
    
    
    2009
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/APresident, Zayo Bandwidth
    
    
    2010
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A2011
    
    
    
    240,000
    
    
    
    60,000
    
    
    
    165,000
    
    
    
    103,397
    
    
    
    568,397Glenn Russo
    
    
    2009
    
    
    
    211,682
    
    
    
    114,750
    (3)
    
    
    64,000
    
    
    
    
    
    
    
    390,432President, Zayo Networks
    
    
    2010
    
    
    
    255,000
    
    
    
    38,250
    (3)
    
    
    
    
    
    
    38,250
    
    
    
    331,5002011
    
    
    
    244,375
    
    
    
    
    
    
    
    115,000
    
    
    
    76,875
    
    
    
    436,250Marty Snella
    
    
    2009
    
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    60,000
    
    
    
    260,000Senior Vice President of
    
    
    2010
    
    
    
    201,667
    
    
    
    
    
    
    
    
    
    
    
    138,500
    
    
    
    340,167Operations, Zayo Bandwidth
    
    
    2011
    
    
    
    220,000
    
    
    
    
    
    
    
    
    
    
    
    108,625
    
    
    
    328,625
 (1)
    
    Amounts shown reflect the grant date fair value calculated in accordance with
Financial Accounting Standards Board Accounting Standards Codification 718-10-10, for the
fiscal years ended June 30, 2011, June 30, 2010 and June 30, 2009. Assumptions used to
determine these values can be found in Note 14: Fair Value Measurements, of our Consolidated
Financial Statements.(2)
    
    Comprises compensation which we describe under  Compensation Discussion and
Analysis  Elements of Executive Compensation  Non-Equity Incentive Compensation Plan.(3)
    
    Mr. Russos bonus was guaranteed at 150% of his target bonus for the quarters ended
December 31, 2008, March 31, 2009, June 30, 2009, and September 30, 2009.  55




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##### Table of Contents



Grants of Plan Based Awards in Fiscal 2011
  All OtherFiscal 2011
    
    
    Stock Awards:
    
    
    Grant DateNon-Equity
    
    
    Number of
    
    
    Fair ValueIncentive Plan
    
    
    Shares of
    
    
    of Stock andGrant
    
    
    Targets
    
    
    Stock or
    
    
    OptionName
    
    Date
    
    
    Threshold
    
    
    Target ($)
    
    
    Maximum
    
    
    Units (#)(2)
    
    
    Awards ($)Daniel Caruso
    
    
    12/29/10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    390,000
    
    
    
    967,20001/05/11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    580,000
    
    
    
    1,438,40001/24/11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,096,118
    
    
    
    005/20/11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,007,425
    
    
    
    461,708Kenneth desGarennes
    
    
    N/A
    
    
    
    0
    
    
    
    102,000
    
    
    
    204,000
    
    
    
    
    
    
    
    001/24/11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,152,075
    
    
    
    005/20/11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    795,519
    
    
    
    182,970David Howson
    
    
    N/A
    
    
    
    0
    
    
    
    84,000
    
    
    
    168,000
    
    
    
    
    
    
    
    1/24/11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,145,027
    
    
    
    3/10/11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500,000
    
    
    
    165,000Glenn Russo
    
    
    N/A
    
    
    
    0
    
    
    
    111,000
    
    
    
    222,000
    
    
    
    
    
    
    
    001/24/11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,000
    
    
    
    005/20/11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500,000
    
    
    
    115,000Marty Snella
    
    
    N/A
    
    
    
    0
    
    
    
    93,500
    
    
    
    187,000
    
    
    
    
    
    
    
    001/24/11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,840,027
    
    
    
    0
 (1)
    
    These figures represent the threshold, target and maximum annual cash payout
opportunity for each executive under our non-equity incentive compensation plan during Fiscal
2011 (See   Elements of Compensation  Non-Equity Incentive Compensation Plan for
additional information regarding this plan and the actual payouts for Fiscal 2011).(2)
    
    The awards shown in this column vest as set forth under the heading Employment
and Equity Arrangements. Outstanding Equity Awards at 2011 Fiscal Year End
  Market Value ofNumber of Shares
    
    
    Shares or Units ofor Units of Stock that
    
    
    Stock that have notName
    
    have not Vested (#)
    
    
    Vested ($)(1)Daniel Caruso
    
    
    11,356,043
    (2)(7)
    
    
    5,371,204Kenneth desGarennes
    
    
    7,624,853
    (3) (8)
    
    
    2,817,651David Howson
    
    
    2,509,610
    (4)(9)
    
    
    876,417Glenn Russo
    
    
    1,360,000
    (5)(10)
    
    
    684,725Marty Snella
    
    
    2,484,992
    (6) (11)
    
    
    952,242
 (1)
    
    Market value is based on the following fair value estimates at the end of
Fiscal 2011. Class
    
    Fair ValuePreferred Unit A
    
    $
    2.10Preferred Unit B
    
    $
    2.80Common Unit A
    
    $
    0.81Common Unit B
    
    $
    0.58Common Unit C
    
    $
    0.33Common Unit D
    
    $
    0.31Common Unit E
    
    $
    0.23
 (2)
    
    Includes unvested Class B, D and E Common Units and Class B Preferred Units.  56




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##### Table of Contents



(3)
    
    Includes unvested Class A, B, D and E Common Units.(4)
    
    Includes unvested Class B and D Common Units.(5)
    
    Includes unvested Class A, B, D and E Common Units.(6)
    
    Includes unvested Class A, B, C and D Common Units.(7)
    
    5,584,384, 3,687,948 and 2,083,711 units will vest during Fiscal 2012, 2013 and
2014, respectively.(8)
    
    3,962,409 2,540,865 and 1,121,580 units will vest during Fiscal 2012, 2013 and 2014,
respectively.(9)
    
    1,190,363, 840,009, and 479,238 units will vest during Fiscal 2012, 2013 and 2014,
respectively.(10)
    
    733,522, 390,833 and 235,644 units will vest during Fiscal 2012, 2013 and 2014,
respectively.(11)
    
    1,349,540, 822,648 and 312,805 units will vest during Fiscal 2012, 2013 and 2014,
respectively. Option Exercises and Stock Vested in 2011
  Market Value ofNumber of Shares
    
    
    Shares or Units ofor Units of Stock
    
    
    Stock that VestedName
    
    that Vested in 2011 (#)
    
    
    in 2011 ($)(1)Daniel Caruso
    
    
    4,515,764
    
    
    
    7,048,744Kenneth desGarennes
    
    
    1,681,778
    
    
    
    2,817,651David Howson
    
    
    135,417
    
    
    
    78,542Glenn Russo
    
    
    562,500
    
    
    
    412,500Marty Snella
    
    
    583,750
    
    
    
    399,488
 (1)
    
    See  Option Exercises and Stock Vested in 2011 for June 30, 2011 fair
value estimates by class. Pension Benefits for Fiscal 2011
  Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
   57




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##### Table of Contents



Potential Payments upon Termination or Change-in-Control
  Market Value ofUnvested Unitsas at June 30,2011that would vestName
    
    upon Change in ControlDaniel Caruso
    
    $
    5,371,204Kenneth desGarennes
    
    $
    1,681,778David Howson
    
    $
    876,417Glenn Russo
    
    $
    684,725Marty Snella
    
    $
    952,242
 Director Compensation
  Fees Earned or
    
    
    
    
    
    
    Non-equityPaid in Cash
    
    
    
    
    
    
    incentive plan
    
    
    All otherName
    
    ($)
    
    
    Equity awards
    
    
    compensation
    
    
    Compensation
    
    
    TotalRick Connor
    
    $
    42,000
    
    
    $
    11,500
    
    
    $
    
    
    
    $
    55,524
    
    
    $
    109,024Don Detampel
    
    $
    37,001
    
    
    $
    
    
    
    $
    
    
    
    $
    48,583
    
    
    $
    85,584
    58




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##### Table of Contents



Other Matters Relating to Management
    Compensation Committee Interlocks and Insider Participation
  Report of the Compensation Committee
  THE COMPENSATION COMMITTEE
 
  59




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##### Table of Contents



ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  Number of
    
    
    
    
    
    
    Number ofPreferred
    
    
    
    
    
    
    PreferredClass A
    
    
    
    
    
    
    Class BUnits
    
    
    Percent
    
    
    Units
    
    
    Percent
    
    
    
    
    
    
    PercentBeneficially
    
    
    of
    
    
    Beneficially
    
    
    of
    
    
    Common
    
    
    ofName of Beneficial Owner
    
    Owned
    
    
    Class
    
    
    Owned
    
    
    Class
    
    
    Units
    
    
    Class5% Beneficial Owners of CIIBattery Ventures(1)
    
    
    22,439,636
    
    
    
    10.2
    %
    
    
    908,330
    
    
    
    2.4
    %
    
    
    
    
    
    
    Centennial Ventures(2)
    
    
    13,199,787
    
    
    
    6.0
    %
    
    
    3,027,767
    
    
    
    8.0
    %
    
    
    
    
    
    
    Charlesbank Capital Partners(3)(8)
    
    
    16,189,149
    
    
    
    7.4
    %
    
    
    21,042,981
    
    
    
    55.9
    %
    
    
    
    
    
    
    Columbia Capital(4)(9)
    
    
    51,056,575
    
    
    
    23.2
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    M/C Partners(5)(10)
    
    
    51,013,255
    
    
    
    23.2
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Morgan Stanley Alternative Investment Partners(6)
    
    
    6,107,143
    
    
    
    2.8
    %
    
    
    8,629,136
    
    
    
    22.9
    %
    
    
    
    
    
    
    Oak Investment Partners XII, Limited Partnership(7)(11)
    
    
    51,928,571
    
    
    
    23.6
    %
    
    
    2,724,990
    
    
    
    7.2
    %
    
    
    
    
    
    
    Our DirectorsDaniel Caruso
    
    
    4,665,333
    
    
    
    2.1
    %
    
    
    970,000
    
    
    
    2.6
    %
    
    
    29,275,765
    
    
    
    26.7
    %Michael Choe(8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    John Siegel(9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gillis Cashman(10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    John Downer(11)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rick Connor
    
    
    
    
    
    
    
    
    
    
    73,059
    
    
    
    0.2
    %
    
    
    240,522
    
    
    
    0.2
    %Our Named Executive Officers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kenneth desGarennes
    
    
    25,000
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    12,674,705
    
    
    
    11.5
    %David Howson
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,645,027
    
    
    
    2.4
    %Glenn S. Russo
    
    
    100,000
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    2,610,000
    
    
    
    0.2
    %Marty Snella
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,091,694
    
    
    
    3.7
    %All directors and executive officers as a group
    
    
    7,350,999
    
    
    
    3.3
    %
    
    
    1,043,059
    
    
    
    2.8
    %
    
    
    61,139293
    
    
    
    55.0
    %
 
 *
    
    Less than 0.1%.  60




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##### Table of Contents



(1)
    
    Aggregate holdings of Battery Ventures VII, L.P., Battery Investment Partners VII,
LLC, and Battery Ventures VII, L.P. The address for all three entities is 930 Winter Street,
Suite 2500, Waltham, MA 02451.(2)
    
    Aggregate holdings of Centennial Ventures VII, L.P. and Centennial Entrepreneurs
Fund VII, L.P. The address for both entities is 1428 Fifteenth Street, Denver, Colorado 80202.(3)
    
    Aggregate holdings of Charlesbank Equity Fund VI, Limited Partnership, CB Offshore
Equity Fund VI, Charlesbank Equity Coinvestment Fund VI, LP, and Charlesbank Equity
Coinvestment Partners, LP. The address for all four entities is 200 Clarendon, 5th Floor,
Boston, MA 02116.(4)
    
    Aggregate holdings of Columbia Capital Equity Partners IV (QP), L.P., Columbia
Capital Equity Partners IV (QPCO), L.P., Columbia Capital Employee Investors IV, L.P.,
Columbia Capital Equity Partners III (QP), L.P., Columbia Capital Equity Partners III (Cayman)
L.P., Columbia Capital Equity Partners III (AI), L.P., Columbia Capital Investors III, L.L.C.,
and Columbia Capital Employee Investors III, L.L.C. The address for all seven entities is 201
N. Union Street, Suite 300, Alexandria, VA, 22314.(5)
    
    Aggregate holdings of M/C Partners VI, L.P., M/C Venture Investors, L.L.C., M/C
Partners V, L.P., and Chestnut Venture Partners, L.P. The address for all four entities is 75
State Street, Suite 2500, Boston, MA, 02109.(6)
    
    Aggregate holdings of Yawlbreak & Co FTBO GTB Capital Partners LP, Morgan Stanley
Private Markets Fund IV LP, Stormbay & Co FTBO Vijverpoort Hulzen C.V. The address for all
three entities is 100 Front Street, Suite 400, West Conshohocken, PA 19428-2881.(7)
    
    Address is 525 University Avenue, Suite 1300, Palo Alto, CA 94301.(8)
    
    Michael Choe is the Managing Director of Charlesbank Capital Partners.(9)
    
    John Siegel is a Partner of Columbia Capital.(10)
    
    Gillis Cashman is a General Partner of M/C Partners.(11)
    
    John Downer is the Director-Private Equity of Oak Investment Partners.  61




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##### Table of Contents



ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
 Onvoy
      Services Provided to Onvoy
  
    
    Transport services for circuits.
 
    
    Leases of colocation racks in various markets.
 
    
    Fiber and optronics management.
 
    
    Leases of colocation racks at the colocation facility at 60 Hudson Street, New York,
New York.
 Services Provided by Onvoy
  
    
    Agent services for customer referrals.
    
    Fiber IRU and services related to fiber in Minnesota.
    
    Transport services covering lit services.
    
    Sublease for space in Minneapolis and Plymouth, Minnesota.
    
    Lease of colocation racks.
    
    Agreements covering VOIP and switching services.
   62




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##### Table of Contents



Year ended June 30,2011
    
    
    2010OVS
    
    
    ZEN
    
    
    Total
    
    
    OVS
    
    
    ZEN
    
    
    TotalRevenue
    
    $
    4,475
    
    
    $
    508
    
    
    $
    4,983
    
    
    $
    1,436
    
    
    $
    
    
    
    $
    1,436Operating costs
    
    
    404
    
    
    
    
    
    
    
    404
    
    
    
    
    
    
    
    
    
    
    
    Selling, general and administrative expenses
    
    
    161
    
    
    
    99
    
    
    
    260
    
    
    
    564
    
    
    
    
    
    
    
    564Net
    
    $
    3,910
    
    
    $
    409
    
    
    $
    4,319
    
    
    $
    872
    
    
    $
    
    
    
    $
    872
   Purchase of Notes
  Transactions with CII
  Director Independence
   63




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##### Table of Contents



ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
  Year Ended June 302011
    
    
    2010Audit Fees
    
    $
    475,620
    
    
    $
    522,080Audit Related Fees
    
    
    62,730
    
    
    
    162,424Tax Fees
    
    
    127,735
    
    
    
    137,298Total
    
    $
    666,085
    
    
    $
    821,802
  
    
    Audit feesThese are fees billed for the fiscal years shown for professional services
performed for the audit of the Companys consolidated financial statements for that year,
comfort letters and consents. Audit fees for each year shown include amounts that have been
billed to us through September 9, 2011 and any additional amounts that are expected to be
billed to us thereafter. The Fiscal 2011 audit fees also include the fees for services
provided by Grant Thornton, LLP during the period in connection with the reviews of the
Companys interim consolidated financial statements.
 
    
    Audit-related feesThese are fees billed for assurance and related services that were
performed in the fiscal years shown and that are traditionally performed by our independent
certified public accounting firm. More specifically, these services include the audits of
historical financial statements required to be included as exhibits to our Registration
Statement on Form S-4 filed with the SEC on October 18, 2010 and audits associated with the
Companys stimulus awards.
 
    
    Tax feesThese are fees billed for all professional services performed in the year
shown by professional staff of our independent registered public accounting firms tax
division except those services related to the audit of our financial statements. These
include fees for tax compliance, tax planning and tax advice. Tax compliance involves
preparation of original and amended tax returns, refund claims and tax payment services.
Tax planning and tax advice encompass a diverse range of subjects, including assistance
with tax audits and appeals, tax advice related to mergers, acquisitions and dispositions,
and requests for rulings or technical advice from taxing authorities.
 Audit Committee Pre-Approval Policy and Procedures.
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PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   Report of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets at June 30, 2011 and 2010
    
    
    F-2Consolidated Statements of Operations for the Years Ended June 30, 2011, 2010 and 2009
    
    
    F-3Consolidated Statements of Members Equity for the Years Ended June 30, 2011, 2010 and 2009
    
    
    F-4Consolidated Statements of Cash Flows for the Years Ended June 30, 2011, 2010 and 2009
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-7
   Financial statements and financial statement schedules required to be filed for the registrant
under Items 8 or 15 are set forth following the index page at page F-l. Exhibits filed as a part of
this report are listed below. Exhibits incorporated by reference are indicated in parentheses
 ExhibitNo.
    
    Description of Exhibit2.1
    
    
    Agreement and Plan of Merger by and among Zayo Group, LLC, Zayo
AFS Acquisition Company, Inc., American Fiber Systems Holdings
Corp. and Robert E. Ingalls Jr., as the Equityholder
Representative, dated June 24, 2010 (incorporated by reference to
Exhibit 10.33 of our Registration Statement on form S-4 filed with
the SEC on October 18, 2010).2.2
    
    
    Membership Interest Purchase Agreement by and among AGL Networks,
LLC, AGL Investments, Inc., and Zayo Group, LLC, dated March 23,
2010 (incorporated by reference to Exhibit 10.34 of our
Registration Statement on form S-4 filed with the SEC on October
18, 2010).2.3
    
    
    Agreement and Plan of Merger dated as of May 28, 2009 by and among
Zayo Group, LLC, Zayo Merger Sub, Inc., a Delaware corporation,
and FiberNet Telecom Group, Inc., a Delaware corporation
(incorporated by reference to Exhibit 10.35 of our Registration
Statement on form S-4 filed with the SEC on October 18, 2010).3.1
    
    
    Certificate of Formation of Zayo Group, LLC (incorporated by
reference to Exhibit 3.1 of our Registration Statement on Form S-4
filed with the SEC on October 18, 2010).3.2
    
    
    Operating Agreement of Zayo Group, LLC (incorporated by reference
to Exhibit 3.2 of our Registration Statement on Form S-4 filed
with the SEC on October 18, 2010).4.1
    
    
    Indenture, dated as of March 12, 2010, between Zayo Group, LLC,
Zayo Capital, Inc., the Guarantors party thereto and The Bank of
New York Mellon Trust Company, N.A., as Trustee (including form
of note)(incorporated by reference to Exhibit 4.1 of our
Registration Statement on Form S-4 filed with the SEC on October
18, 2010).4.2
    
    
    First Supplemental Indenture, dated as of September 13, 2010,
between Zayo Fiber Solutions, LLC and The Bank of New York Mellon
Trust Company, N.A., as Trustee (incorporated by reference to
Exhibit 4.2 of our Registration Statement on Form S-4 filed with
the SEC on October 18, 2010).
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ExhibitNo.
    
    Description of Exhibit4.3
    
    
    Second Supplemental Indenture, dated as of September 20, 2010, among
Zayo Group, LLC, Zayo Capital, Inc., the Guarantors party thereto and
The Bank of New York Mellon Trust Company, N.A., as Trustee
(including form of note) (incorporated by reference to Exhibit 4.3 of
our Registration Statement on Form S-4 filed with the SEC on October
18, 2010).4.4
    
    
    Third Supplemental Indenture, dated as of November 5, 2010, among
American Fiber Systems Holding Corp., American Fiber Systems, Inc.,
and The Bank of New York Mellon Trust Company, N.A., as Trustee
(incorporated by reference to Exhibit 4.4 of Amendment No. 1 of our
Registration Statement on Form S-4 filed with the SEC on November 8,
2010).10.1
    
    
    Credit Agreement, dated as of March 12, 2010, by and among Zayo
Group, LLC and Zayo Capital, Inc., as Borrowers, the persons party
thereto from time to time as Guarantors, the financial institutions
party thereto from time to time as Lenders, SunTrust Bank, as Issuing
Bank, Morgan Stanley & Co. Incorporated and RBC Capital Markets
Corporation, as Co-Syndication Agents, SunTrust Bank, as
Administrative Agent, and SunTrust Robinson Humphrey, Inc., as Sole
Lead Arrangers (incorporated by reference to Exhibit 10.1 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010).10.2
    
    
    Guaranty Supplement to the March 12, 2010 Credit Agreement, dated as
of August 16, 2010, by Zayo Fiber Solutions, LLC, in favor of
SunTrust Bank, in its capacity as Administrative Agent (incorporated
by reference to Exhibit 10.2 of our Registration Statement on Form
S-4 filed with the SEC on October 18, 2010).10.4
    
    
    Guaranty Supplement to the March 12, 2010 Credit Agreement, dated as
of November 5, 2010, by American Fiber Systems, Inc., in favor of
SunTrust Bank, in its capacity as Administrative Agent (incorporated
by reference to Exhibit 10.4 of Amendment No. 1 of our Registration
Statement on Form S-4 filed with the SEC on November 8, 2010).10.5
    
    
    Amendment to the March 12, 2010 Credit Agreement, dated as of
September 13, 2010, by and among Zayo Group, LLC and Zayo Capital,
Inc., as Borrowers, the persons party thereto from time to time as
Guarantors, the financial institutions party thereto from time to
time as Lenders, SunTrust Bank, as Issuing Bank, Morgan Stanley & Co.
Incorporated and RBC Capital Markets Corporation, as Co-Syndication
Agents, SunTrust Bank, as Administrative Agent, and SunTrust Robinson
Humphrey, Inc., as Sole Lead Arrangers (incorporated by reference to
Exhibit 10.5 of our Registration Statement on Form S-4 filed with the
SEC on October 18, 2010).10.6
    
    
    Security Agreement, dated as of March 12, 2010, among the Grantors
party thereto and SunTrust Bank, in its capacity as Collateral Agent
for the secured parties (incorporated by reference to Exhibit 10.6 of
our Registration Statement on Form S-4 filed with the SEC on October
18, 2010).10.7
    
    
    Security Agreement Supplement No. 1 to the March 12, 2010 Security
Agreement, dated as of August 16, 2010, between Zayo Fiber Solutions,
LLC and SunTrust Bank, in its capacity as Collateral Agent for the
secured parties (incorporated by reference to Exhibit 10.7 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010).10.8
    
    
    Security Agreement Supplement No. 2 to the March 12, 2010 Security
Agreement, dated as of November 5, 2010, among American Fiber Systems
Holding Corp., American Fiber Systems, Inc. and SunTrust Bank, in it
capacity as Collateral Agent for the Secured Parties (incorporated
by reference to Exhibit 10.8 of Amendment No. 1 of our Registration
Statement on Form S-4 filed with the SEC on November 8, 2010)
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ExhibitNo.
    
    Description of Exhibit10.9
    
    
    Trademark Security Agreement, dated as of March 12, 2010, among the
Grantors party thereto and SunTrust Bank, in its capacity as
Collateral Agent for the secured parties (incorporated by reference
to Exhibit 10.9 of our Registration Statement on Form S-4 filed with
the SEC on October 18, 2010).10.10
    
    
    Collateral Agency and Intercreditor Agreement, dated as of March 12,
2010, among Zayo Group, LLC, Zayo Capital, Inc., and the other
Grantors referred to therein, SunTrust Bank, as Joint Collateral
Agent and Revolving Loan Agent for the lender under the credit
agreement, and The Bank of New York Mellon Trust Company, N.A., as
Initial Notes Authorized Representative (incorporated by reference
to Exhibit 10.10 of our Registration Statement on Form S-4 filed
with the SEC on October 18, 2010).10.11
    
    
    Joinder and Amendment Agreement to the March 12, 2010 Collateral
Agency and Intercreditor Agreement, dated as of September 20, 2010,
among Zayo Group, LLC, Zayo Capital, Inc., and the other Grantors
referred to therein, SunTrust Bank, as Joint Collateral Agent and
Revolving Loan Agent for the lender under the credit agreement, and
The Bank of New York Mellon Trust Company, N.A., as the Initial
Notes Authorized Representative and the Additional Notes Authorized
Representative (incorporated by reference to Exhibit 10.11 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010).10.12
    
    
    Founder Noncompetition Agreement, dated as of May 22, 2007, by and
between Communications Infrastructure Investments, LLC and Dan
Caruso (incorporated by reference to Exhibit 10.12 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.13
    
    
    Vesting Agreement, dated as of December 31, 2007, by and among
Communications Infrastructure Investments, LLC, Daniel P. Caruso,
and the Founder Investors (as defined therein), as amended by the
Amendment to Vesting Agreement, effective as of March 21, 2008, the
Second Amendment to Vesting Agreement, effective as of October 20,
2009, and the Third Amendment to the Vesting Agreement, effective as
of March 19, 2010 (incorporated by reference to Exhibit 10.13 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.14
    
    
    Employee Equity Agreement, dated as of March 21, 2008, by and
between Communications Infrastructure Investments, LLC, and Kenneth
desGarennes (incorporated by reference to Exhibit 10.14 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.15
    
    
    Employee Equity Agreement, dated as of October 31, 2008, by and
between Communications Infrastructure Investments, LLC, and Kenneth
desGarennes (incorporated by reference to Exhibit 10.15 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.16
    
    
    Employee Equity Agreement, dated as of October 20, 2009, by and
between Communications Infrastructure Investments, LLC, and Kenneth
desGarennes (incorporated by reference to Exhibit 10.16 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.17
    
    
    Employee Equity Agreement, dated as of March 19, 2010, by and
between Communications Infrastructure Investments, LLC, and Kenneth
desGarennes (incorporated by reference to Exhibit 10.17 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.18
    
    
    Founder Noncompetition Agreement, dated as of May 22, 2007, by and
between Communications Infrastructure Investments, LLC and John
Scarano. (incorporated by reference to Exhibit 10.18 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.19
    
    
    Vesting Agreement, dated as of January 10, 2008, by and among
Communications Infrastructure Investments, LLC, John L. Scarano, and
the Founder Investors (as defined therein), as amended by the
Amendment to Vesting Agreement, effective as of March 21, 2008, the
Second Amendment to Vesting Agreement, effective as of October 20,
2009, and the Third Amendment to the Vesting Agreement, effective as
of March 19, 2010 (incorporated by reference to Exhibit 10.19 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.20
    
    
    Offer Letter from Zayo Group to Glenn Russo, dated August 8, 2008
(incorporated by reference to Exhibit 10.20 of our Registration
Statement on Form S-4 filed with the SEC on October 18, 2010). +
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ExhibitNo.
    
    Description of Exhibit10.21
    
    
    Class A Equity Agreement, dated as of November 19, 2008, by and
between Communications Infrastructure Investments, LLC, Glenn Russo,
and VP Holdings, LLC (incorporated by reference to Exhibit 10.21 of
our Registration Statement on Form S-4 filed with the SEC on October
18, 2010). +10.22
    
    
    Class A Equity Agreement, dated as of November 19, 2008, by and
between VP Holdings, LLC, and Glenn Russo (incorporated by reference
to Exhibit 10.22 of our Registration Statement on Form S-4 filed
with the SEC on October 18, 2010). +10.23
    
    
    Employee Equity Agreement, dated as of October 31, 2008, by and
between Communications Infrastructure Investments, LLC, and Glenn
Russo (incorporated by reference to Exhibit 10.23 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.24
    
    
    Employee Equity Agreement, dated as of March 19, 2010, by and
between Communications Infrastructure Investments, LLC, and Glenn S.
Russo (incorporated by reference to Exhibit 10.24 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.25
    
    
    Employee Equity Agreement, dated as of March 31, 2008, by and
between Communications Infrastructure Investments, LLC, and Martin
Snella (incorporated by reference to Exhibit 10.25 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.26
    
    
    Employee Equity Agreement, dated as of March 31, 2008, by and
between Communications Infrastructure Investments, LLC, and Martin
Snella (incorporated by reference to Exhibit 10.26 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.27
    
    
    Employee Equity Agreement, dated as of October 31, 2008, by and
between Communications Infrastructure Investments, LLC, and Martin
Snella (incorporated by reference to Exhibit 10.27 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.28
    
    
    Employee Equity Agreement, dated as of October 20, 2009, by and
between Communications Infrastructure Investments, LLC, and Martin
Snella (incorporated by reference to Exhibit 10.28 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010). +10.29
    
    
    Employee Equity Agreement, dated as of May 27, 2010, by and between
Communications Infrastructure Investments, LLC, and Martin Snella
(incorporated by reference to Exhibit 10.29 of our Registration
Statement on Form S-4 filed with the SEC on October 18, 2010). +10.30
    
    
    Employee Equity Agreement, dated as of January 2, 2008, by and
between Communications Infrastructure Investments, LLC, and Kenneth
desGarennes (incorporated by reference to Exhibit 10.38 of Amendment
No. 1 of our Registration Statement on Form S-4 filed with the SEC
on November 8, 2010). +10.31
    
    
    Employee Equity Agreement, dated as of March 19, 2010, by and
between Communications Infrastructure Investments, LLC, and Martin
Snella (incorporated by reference to Exhibit 10.39 of Amendment No.
1 of our Registration Statement on Form S-4 filed with the SEC on
November 8, 2010). +10.32
    
    
    Agreement of Lease, dated as of February 17, 1998, by and between 60
Hudson Owner LLC (successor to Westport Communications LLC and
Hudson Telegraph Associates L.P., formerly known as Hudson Telegraph
Associates), a Delaware limited liability company, Zayo Colocation,
Inc. (successor by name change of FiberNet Telecom Group, Inc.),
FiberNet Telecom, Inc. (successor by merger to FiberNet Equal
Access, L.L.C.), and Zayo Group, LLC (as guarantor), as assigned on
January 1, 2001, as amended on January 1, 2001, December 4, 2003,
October 29, 2004, March 1, 2007, April 4, 2007, May 26, 2009 and
March 12, 2010 (incorporated by reference to Exhibit 10.36 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010).
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ExhibitNo.
    
    Description of Exhibit10.33
    
    
    Agreement of Lease, dated as of April 1, 2001, between 60 Hudson
Owner LLC (successor to Westport Communications LLC and Hudson
Telegraph Associates, L.P., formerly known as Hudson Telegraph
Associates), a Delaware limited liability company, FiberNet Telecom,
Inc. (successor by merger to FiberNet Equal Access L.L.C.), Zayo
Colocation, Inc. (successor by change of name to FiberNet Telecom
Group, Inc.), and Zayo Group, LLC (as guarantor), as assigned on
April 1, 2001, as amended on January 30, 2002, November 7, 2002,
April 1, 2003, October 31, 2003, October 29, 2004, January 31, 2005,
January 11, 2007, March 2, 2007, April 4, 2007, May 26, 2009 and
March 12, 2010 (incorporated by reference to Exhibit 10.37 of our
Registration Statement on Form S-4 filed with the SEC on October 18,
2010).10.34
    
    
    Vesting Agreement between Communications Infrastructure Investments,
LLC; Daniel P. Caruso; and Bear Equity, LLC, dated December 29, 2010
(incorporated by reference to Exhibit 10.1 of our Current Report on
Form 8-K filed with the SEC on January 13, 2011). +10.35
    
    
    Vesting Agreement between Communications Infrastructure Investments,
LLC; Daniel P. Caruso; and Bear Equity, LLC, dated January 5, 2011
(incorporated by reference to Exhibit 10.2 of our Current Report on
Form 8-K filed with the SEC on January 13, 2011). +10.36
    
    
    Employee Equity Agreement, dated as of March 10, 2011, by and
between Communications Infrastructure Investments, LLC, and David
Howson. +10.37
    
    
    Offer Letter from Zayo Group to David Howson, dated May 28, 2010. +10.38
    
    
    Noncompetition Agreement between Communications Infrastructure
Investments, LLC and Dan Caruso dated December 29, 2010.10.39
    
    
    Form of Class D Common Unit Employee Equity Agreement. +10.40
    
    
    Form of Class E Common Unit Employee Equity Agreement. +10.41
    
    
    Fourth Amendment to Vesting Agreement by and among Communications
Infrastructure Investments, LLC, Daniel Caruso and the Founder
Investors dated January 24, 2011. +10.42
    
    
    Fifth Amendment to Vesting Agreement by and among Communications
Infrastructure Investments, LLC, Daniel Caruso and the Founder
Investors dated June 1, 2011. +12.1
    
    
    Statement of Computation of Ratio of Earnings to Fixed Charges.21.1
    
    
    List of subsidiaries of the Company.31.1
    
    
    Certification of Chief Executive Officer of the Registrant, pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934.31.2
    
    
    Certification of Chief Financial Officer of the Registrant, pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934.32.1
    
    
    Certification of Chief Executive Officer of the Registrant, pursuant
to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer of the Registrant, pursuant
to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 F-1




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ZAYO GROUP, LLC AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(in thousands)
 June 30,
    
    
    June 30,2011
    
    
    2010AssetsCurrent assetsCash and cash equivalents
    
    $
    25,394
    
    
    $
    87,864Trade receivables, net of allowance of $799 and $498 as of June 30, 2011 and 2010, respectively
    
    
    13,983
    
    
    
    11,551Due from related-parties
    
    
    187
    
    
    
    626Prepaid expenses
    
    
    6,388
    
    
    
    4,810Deferred income taxes
    
    
    3,343
    
    
    
    4,060Other assets, current
    
    
    645
    
    
    
    334Assets of discontinued operations, current
    
    
    
    
    
    
    3,061Total current assets
    
    
    49,940
    
    
    
    112,306Property and equipment, net of accumulated depreciation of $101,941 and $54,077 as of June 30,
2011 and 2010, respectively
    
    
    518,513
    
    
    
    297,889Intangible assets, net of accumulated amortization of $37,980 and $25,421 as of June 30, 2011 and
2010, respectively
    
    
    104,672
    
    
    
    56,714Goodwill
    
    
    83,820
    
    
    
    67,854Deferred income taxes
    
    
    
    
    
    
    8,508Debt issuance costs, net
    
    
    11,446
    
    
    
    9,560Investment in US Carrier
    
    
    15,075
    
    
    
    Other assets, non-current
    
    
    5,795
    
    
    
    4,866Assets of discontinued operations, non-current
    
    
    
    
    
    
    8,143Total assets
    
    $
    789,261
    
    
    $
    565,840Liabilities and members equityCurrent liabilitiesAccounts payable
    
    $
    12,988
    
    
    $
    10,015Accrued liabilities
    
    
    22,453
    
    
    
    17,152Accrued interest
    
    
    10,627
    
    
    
    7,794Capital lease obligations, current
    
    
    950
    
    
    
    1,673Due to related-parties
    
    
    4,590
    
    
    
    Deferred revenue, current
    
    
    15,664
    
    
    
    8,091Liabilities of discontinued operations, current
    
    
    
    
    
    
    1,740Total current liabilities
    
    
    67,272
    
    
    
    46,465Capital lease obligations, non-current
    
    
    10,224
    
    
    
    11,033Long-term debt
    
    
    354,414
    
    
    
    247,080Deferred revenue, non-current
    
    
    63,893
    
    
    
    22,605Stock-based compensation liability
    
    
    45,067
    
    
    
    21,556Deferred tax liability
    
    
    8,322
    
    
    
    Other long term liabilities
    
    
    2,724
    
    
    
    2,397Liabilities of discontinued operations, non-current
    
    
    
    
    
    
    1,568Total liabilities
    
    
    551,916
    
    
    
    352,704Commitments and contingencies (Note 15)Members equityMembers interest
    
    
    245,433
    
    
    
    217,129Accumulated deficit
    
    
    (8,088
    )
    
    
    (3,993
    )Total members equity
    
    
    237,345
    
    
    
    213,136Total liabilities and members equity
    
    $
    789,261
    
    
    $
    565,840
   F-2




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ZAYO GROUP, LLC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
 Year Ended June 30,2011
    
    
    2010
    
    
    2009Revenue
    
    $
    287,235
    
    
    $
    199,330
    
    
    $
    125,339Operating costs and expensesOperating costs, excluding depreciation and amortization
    
    
    71,528
    
    
    
    62,688
    
    
    
    37,792Selling, general and administrative expenses
    
    
    89,846
    
    
    
    65,911
    
    
    
    51,493Stock-based compensation
    
    
    24,310
    
    
    
    18,168
    
    
    
    6,412Depreciation and amortization
    
    
    60,463
    
    
    
    38,738
    
    
    
    26,554Total operating costs and expenses
    
    
    246,147
    
    
    
    185,505
    
    
    
    122,251Operating income
    
    
    41,088
    
    
    
    13,825
    
    
    
    3,088Other income/(expense)Interest expense
    
    
    (33,414
    )
    
    
    (18,692
    )
    
    
    (15,245
    )Other (expense)/income, net
    
    
    (126
    )
    
    
    1,526
    
    
    
    234Gain on bargain purchase
    
    
    
    
    
    
    9,081
    
    
    
    Loss on extinguishment of debt
    
    
    
    
    
    
    (5,881
    )
    
    
    Total other expense, net
    
    
    (33,540
    )
    
    
    (13,966
    )
    
    
    (15,011
    )Earnings/(loss) from continuing operations before provision for income taxes
    
    
    7,548
    
    
    
    (141
    )
    
    
    (11,923
    )Provision/(benefit) for income taxes
    
    
    12,542
    
    
    
    4,823
    
    
    
    (2,321
    )Loss from continuing operations
    
    
    (4,994
    )
    
    
    (4,964
    )
    
    
    (9,602
    )Earnings from discontinued operations, net of income taxes
    
    
    899
    
    
    
    5,425
    
    
    
    7,355Net (loss)/earnings
    
    $
    (4,095
    )
    
    $
    461
    
    
    $
    (2,247
    )
   F-3




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ZAYO GROUP, LLC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF MEMBERS EQUITY
(in thousands)
 Members
    
    
    Accumulated
    
    
    Total Membersinterest
    
    
    Deficit
    
    
    equityBalance at July 1, 2008
    
    $
    179,878
    
    
    $
    (2,207
    )
    
    $
    177,671Capital contributed (cash)
    
    
    35,546
    
    
    
    
    
    
    
    35,546Preferred stock-based compensation
    
    
    2,049
    
    
    
    
    
    
    
    2,049Net loss
    
    
    
    
    
    
    (2,247
    )
    
    
    (2,247
    )Balance at June 30, 2009
    
    
    217,473
    
    
    
    (4,454
    )
    
    
    213,019Capital contributed (cash)
    
    
    39,800
    
    
    
    
    
    
    
    39,800Non-cash settlements with Parent, net
    
    
    1,200
    
    
    
    
    
    
    
    1,200Preferred stock-based compensation
    
    
    1,195
    
    
    
    
    
    
    
    1,195Spin-off of Onvoy Voice Services, Inc.
    
    
    (42,539
    )
    
    
    
    
    
    
    (42,539
    )Net earnings
    
    
    
    
    
    
    461
    
    
    
    461Balance at June 30, 2010
    
    
    217,129
    
    
    
    (3,993
    )
    
    
    213,136Capital contributed (cash)
    
    
    36,450
    
    
    
    
    
    
    
    36,450Non-cash settlements with Parent, net
    
    
    (2,598
    )
    
    
    
    
    
    
    (2,598
    )Preferred stock-based compensation
    
    
    820
    
    
    
    
    
    
    
    820Spin-off of Zayo Enterprise Networks, LLC
    
    
    (6,368
    )
    
    
    
    
    
    
    (6,368
    )Net loss
    
    
    
    
    
    
    (4,095
    )
    
    
    (4,095
    )Balance at June 30, 2011
    
    $
    245,433
    
    
    $
    (8,088
    )
    
    $
    237,345
   F-4




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Year endedJune 30,2011
    
    
    2010
    
    
    2009Cash flows from operating activitiesNet (loss)/earnings
    
    $
    (4,095
    )
    
    $
    461
    
    
    $
    (2,247
    )Earnings from discontinued operations
    
    
    899
    
    
    
    5,425
    
    
    
    7,355Loss from continuing operations
    
    
    (4,994
    )
    
    
    (4,964
    )
    
    
    (9,602
    )Adjustments to reconcile net loss to net cash provided by operating activitiesDepreciation and amortization
    
    
    60,463
    
    
    
    38,738
    
    
    
    26,554Loss on extinguishment of debt
    
    
    
    
    
    
    5,881
    
    
    
    Loss on disposal of property and equipment
    
    
    84
    
    
    
    
    
    
    
    66Provision for bad debts
    
    
    794
    
    
    
    168
    
    
    
    209Amortization of deferred financing costs and discount on debt
    
    
    2,781
    
    
    
    1,624
    
    
    
    1,114Accretion of premium on debt
    
    
    (368
    )
    
    
    
    
    
    
    Stock-based compensation
    
    
    24,310
    
    
    
    18,168
    
    
    
    6,412Unrealized loss on interest rate swap
    
    
    
    
    
    
    744
    
    
    
    3,143Gain on bargain purchase
    
    
    
    
    
    
    (9,081
    )
    
    
    Amortization of deferred revenue
    
    
    (8,976
    )
    
    
    (3,500
    )
    
    
    (2,011
    )Deferred income taxes
    
    
    11,093
    
    
    
    4,068
    
    
    
    (2,074
    )Changes in operating assets and liabilities, net of acquisitionsTrade receivables
    
    
    2,449
    
    
    
    801
    
    
    
    2,494Interest rate swap
    
    
    (566
    )
    
    
    (2,462
    )
    
    
    (859
    )Prepaid expenses
    
    
    (638
    )
    
    
    (271
    )
    
    
    (895
    )Other assets
    
    
    2,440
    
    
    
    21
    
    
    
    (1,024
    )Accounts payable and accrued liabilities
    
    
    1,409
    
    
    
    6,429
    
    
    
    (4,249
    )Payables to related-parties
    
    
    4,944
    
    
    
    (422
    )
    
    
    872Customer prepayments
    
    
    4,629
    
    
    
    2,243
    
    
    
    4,839Other liabilities
    
    
    (2,800
    )
    
    
    15
    
    
    
    (322
    )Net cash provided by continuing operating activities
    
    
    97,054
    
    
    
    58,200
    
    
    
    24,667Cash flows from investing activitiesPurchases of property and equipment
    
    
    (116,068
    )
    
    
    (58,821
    )
    
    
    (61,614
    )Broadband stimulus grants received
    
    
    3,544
    
    
    
    70
    
    
    
    Proceeds from sale of property and equipment
    
    
    28
    
    
    
    
    
    
    
    Merger with American Fiber Systems Holdings Corporation, net of cash acquired
    
    
    (110,000
    )
    
    
    
    
    
    
    Acquisition of AGL Networks, LLC, net of cash acquired
    
    
    (73,666
    )
    
    
    
    
    
    
    Acquisition of FiberNet Telecom Group, Inc., net of cash acquired
    
    
    
    
    
    
    (96,571
    )
    
    
    Acquisition of Citynet Fiber network, LLC, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (35
    )Acquisition of Northwest Telephone, Inc., net of cash acquired
    
    
    
    
    
    
    
    
    
    
    618Acquisition of Columbia Fiber Solutions, LLC, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (12,091
    )Net cash used in investing activities
    
    
    (296,162
    )
    
    
    (155,322
    )
    
    
    (73,122
    )
  (Continued)
  F-5




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Year endedJune 30,2011
    
    
    2010
    
    
    2009Cash flows from financing activitiesEquity contributions
    
    $
    36,450
    
    
    $
    39,800
    
    
    $
    35,546Proceeds from long-term debt
    
    
    103,000
    
    
    
    276,948
    
    
    
    47,000Principal repayments on long-term debt
    
    
    
    
    
    
    (166,193
    )
    
    
    (10,677
    )Changes in restricted cash
    
    
    578
    
    
    
    (564
    )
    
    
    Principal repayments on capital lease obligations
    
    
    (1,732
    )
    
    
    (2,192
    )
    
    
    (2,267
    )Deferred financing costs
    
    
    (4,106
    )
    
    
    (12,353
    )
    
    
    (1,681
    )Net cash provided by financing activities
    
    
    134,190
    
    
    
    135,446
    
    
    
    67,921Cash flows from discontinued operationsOperating activities
    
    
    2,622
    
    
    
    13,923
    
    
    
    15,673Investing activities
    
    
    (382
    )
    
    
    (1,809
    )
    
    
    (1,556
    )Net cash provided by discontinued operations
    
    
    2,240
    
    
    
    12,114
    
    
    
    14,117Net (decrease)/increase in cash and cash equivalents
    
    
    (62,678
    )
    
    
    50,438
    
    
    
    33,583Cash and cash equivalents, beginning of period
    
    
    87,864
    
    
    
    38,019
    
    
    
    4,388Increase/(decrease) in cash and cash equivalents of discontinued operations
    
    
    208
    
    
    
    (593
    )
    
    
    48Cash and cash equivalents, end of period
    
    $
    25,394
    
    
    $
    87,864
    
    
    $
    38,019Supplemental disclosure of non-cash, investing and financing activities:Cash paid for interest
    
    $
    31,938
    
    
    $
    6,215
    
    
    $
    10,845Cash paid for income taxes
    
    
    2,974
    
    
    
    257
    
    
    
    326Non-cash additions to property and equipment from capital leases
    
    
    200
    
    
    
    324
    
    
    
    1,650Increase/(decrease) in accounts payable and accrued expenses for purchases
of property and equipment
    
    
    5,911
    
    
    
    3,357
    
    
    
    (1,415
    )Promissory Note issued as consideration for American Fibers Systems
Holding Corporation merger
    
    
    4,500
    
    
    
    
    
    
    
    
 Acquisitions Spin-off of Business Units
 Equity
   F-6




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 (1) ORGANIZATION AND DESCRIPTION OF BUSINESS
  
    
    Dark and lit bandwidth infrastructure services on metro and regional fiber
networks.
 
    
    Colocation and interconnection services.
  (2) BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 a.
    
    Basis of Presentation
   b.
    
    Spin-off of Business Units
   c.
    
    Use of Estimates
   F-7




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 d.
    
    Cash and Cash Equivalents and Restricted Cash
  e.
    
    Investments
  f.
    
    Trade Receivables
  g.
    
    Property and Equipment
       F-8




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 h.
    
    Goodwill and Purchased Intangibles
 .
  i.
    
    Derivative Financial Instruments
 Long-term Debt Fair Value Measurements
 j.
    
    Revenue Recognition
    
    
    the sale has been consummated;
 
    
    the customers initial and continuing investments are adequate to
demonstrate a commitment to pay for the property;
    
    the Companys receivable is not subject to future subordination; and
 
    
    the Company has transferred to the buyer the usual risks and rewards of
ownership in a transaction that is in substance a sale and does not have a
substantial continuing involvement with the property.
  F-9




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
  k.
    
    Operating Costs and Accrued Liabilities
    l.
    
    Stock-Based Compensation
    m.
    
    Government Grants
   F-10




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 n.
    
    Income Taxes
    o.
    
    Fair Value of Financial Instruments
 Fair Value Measurements
 Fair Value Hierarchy
  Level 1
  Level 2
  
    
    quoted prices for similar assets or liabilities in active markets;
 
    
    quoted prices for identical or similar assets or liabilities in inactive
markets;
 
    
    inputs other than quoted prices that are observable for the asset or
liability; and
 
    
    inputs that are derived principally from or corroborated by observable market
data by correlation or other means.
   F-11




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 Level 3
   p.
    
    Concentration of Credit Risk
   q.
    
    Recently Issued Accounting Standards
  Disclosure of Supplementary Pro
Forma Information for Business Combinations. Acquisitions
 (3) ACQUISITIONS
   Acquisitions during the year ended June 30, 2011
 American Fiber Systems Holding Corporation (AFS)
 Long-Term Debt
   F-12




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
  AFSAcquisition date
    
    October 1, 2010Current assets
    
    $
    3,808Property and equipment
    
    
    56,481Intangibles  customer relationships
    
    
    57,082Goodwill
    
    
    15,746Investment in US Carrier
    
    
    15,075Other assets
    
    
    335Total assets acquired
    
    
    148,527Current liabilities
    
    
    3,396Deferred revenue
    
    
    23,905Deferred tax liability
    
    
    3,958Other liabilities
    
    
    3,127Total liabilities assumed
    
    
    34,386Net assets acquired
    
    
    114,141Seller Note payable to former AFS Holdings owners
    
    
    (4,141
    )Net cash paid
    
    $
    110,000
     AGL Networks, LLC (AGL Networks)
   F-13




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
  AGL NetworksAcquisition date
    
    July 1, 2010Current assets
    
    $
    3,714Property and equipment
    
    
    93,136Intangibles  customer relationships
    
    
    3,433Goodwill
    
    
    220Other assets
    
    
    680Total assets acquired
    
    
    101,183Current liabilities
    
    
    1,006Deferred revenue
    
    
    26,511Total liabilities assumed
    
    
    27,517Net assets acquired
    
    $
    73,666Purchase consideration/Net cash paid
    
    $
    73,666
     Acquisition costs
  Acquisition during the year ended June 30, 2010
 FiberNet Networks Telecom Group, Inc. (FiberNet)
   F-14




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
   FiberNetAcquisition date
    
    September 9, 2009Current assets
    
    $
    16,824Property and equipment
    
    
    50,734Intangibles
    
    
    43,900Deferred income taxes
    
    
    19,659Other assets
    
    
    838Total assets acquired
    
    
    131,955Current liabilities
    
    
    11,534Deferred revenue
    
    
    7,257Total liabilities assumed
    
    
    18,791Net assets acquired
    
    
    113,164Excess of net assets over purchase consideration (bargain purchase)
    
    
    9,081Purchase consideration
    
    
    104,083Less cash acquired
    
    
    (7,512
    )Net cash paid
    
    $
    96,571
    Acquisition costs
  Acquisition during the year ended June 30, 2009
 Columbia Fiber Solutions (CFS)
   F-15




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
  Acquisition date
    
    CFS
September 30, 2008Current assets
    
    $
    461Property and equipment
    
    
    4,772Intangibles
    
    
    3,412Goodwill
    
    
    4,170Total assets acquired
    
    
    12,815Current liabilities
    
    
    500Deferred revenue
    
    
    154Total liabilities assumed
    
    
    654Purchase consideration
    
    
    12,161Less cash acquired
    
    
    70Net cash paid
    
    $
    12,091
   Acquisition costs
  Pro-forma Financial Information (unaudited)
  Year ended June 30,2011
    
    
    2010Revenue
    
    $
    295,137
    
    
    $
    266,865Loss from continuing operations
    
    $
    (7,719
    )
    
    $
    (1,231
    )
  F-16




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 (4) SPIN-OFF OF BUSINESS UNITS
  Segment Reporting, .
 Discontinued
Operations
  Year ended June 30,2011
    
    
    2010
    
    
    2009OVS
    
    
    ZEN
    
    
    Total
    
    
    OVS
    
    
    ZEN
    
    
    Total
    
    
    OVS
    
    
    ZEN
    
    
    TotalRevenue
    
    $
    
    
    
    $
    16,722
    
    
    $
    16,722
    
    
    $
    28,489
    
    
    $
    24,715
    
    
    $
    53,204
    
    
    $
    38,721
    
    
    $
    25,465
    
    
    $
    64,186Earnings before income taxes
    
    
    
    
    
    $
    1,537
    
    
    $
    1,537
    
    
    $
    6,037
    
    
    $
    3,500
    
    
    $
    9,537
    
    
    $
    11,687
    
    
    $
    527
    
    
    $
    12,214Income tax expense
    
    
    
    
    
    
    638
    
    
    
    638
    
    
    
    2,642
    
    
    
    1,470
    
    
    
    4,112
    
    
    
    4,644
    
    
    
    215
    
    
    
    4,859Earnings from discontinued operations, net of
income taxes
    
    $
    
    
    
    $
    899
    
    
    $
    899
    
    
    $
    3,395
    
    
    $
    2,030
    
    
    $
    5,425
    
    
    $
    7,043
    
    
    $
    312
    
    
    $
    7,355
  As of June 30,2010Assets of discontinued operationsCurrent assets
    
    $
    3,061Property and equipment, net
    
    
    4,022Intangible assets, net
    
    
    3,137Goodwill
    
    
    897Other assets
    
    
    87Total assets
    
    $
    11,204Liabilities of discontinued operationsCurrent liabilities
    
    $
    1,740Deferred tax liability
    
    
    1,458Other liabilities
    
    
    110Total liabilities
    
    $
    3,308
  F-17




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 Related-Party Transactions,
 (5) INVESTMENT
   (6) PROPERTY AND EQUIPMENT
  Estimateduseful lives (in
    
    
    As of June 30years)
    
    
    2011
    
    
    2010Land
    
    N/A
    
    
    $
    228
    
    
    $
    209Building improvements and site improvements
    
    8 to15
    
    
    
    11,692
    
    
    
    8,999Furniture, fixtures and office equipment
    
    3 to7
    
    
    
    1,295
    
    
    
    1,124Computer hardware
    
    2 to 5
    
    
    
    3,461
    
    
    
    2,595Software
    
    2 to 3
    
    
    
    4,243
    
    
    
    3,095Machinery and equipment
    
    3 to 7
    
    
    
    6,469
    
    
    
    3,568Fiber optic equipment
    
    4 to 8
    
    
    
    326,163
    
    
    
    127,379Circuit switch equipment
    
    10
    
    
    
    7,378
    
    
    
    6,938Packet switch equipment
    
    3 to 5
    
    
    
    20,727
    
    
    
    17,786Fiber optic network
    
    8 to 20
    
    
    
    192,926
    
    
    
    140,098Construction in progress
    
    N/A
    
    
    
    45,872
    
    
    
    40,175Total
    
    
    
    
    
    
    620,454
    
    
    
    351,966Less accumulated depreciation
    
    
    
    
    
    
    (101,941
    )
    
    
    (54,077
    )Property and equipment, net
    
    
    
    
    
    $
    518,513
    
    
    $
    297,889
   F-18




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
  Commitments and Contingencies- Other Commitments.
  (7) GOODWILL
  Zayo Bandwidth
    
    
    Zayo Fiber Solution
    
    
    zColo
    
    
    TotalAs of July 1, 2009
    
    
    67,854
    
    
    
    
    
    
    
    
    
    
    
    67,854Additions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transfers
    
    
    (24
    )
    
    
    
    
    
    
    24
    
    
    
    As of June 30, 2010
    
    
    67,830
    
    
    
    
    
    
    
    24
    
    
    
    67,854Additions
    
    
    8,076
    
    
    
    7,890
    
    
    
    
    
    
    
    15,966Transfers
    
    
    (4,192
    )
    
    
    4,192
    
    
    
    
    
    
    
    As of June 30, 2011
    
    $
    71,714
    
    
    $
    12,082
    
    
    $
    24
    
    
    $
    83,820
 Segment Reporting
 Segment Reporting
  F-19




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 (8) INTANGIBLE ASSETS
  GrossCarrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    NetJune 30, 2011Customer relationships
    
    $
    133,317
    
    
    $
    (28,645
    )
    
    $
    104,672Non-compete agreements
    
    
    8,835
    
    
    
    (8,835
    )
    
    
    Tradenames
    
    
    500
    
    
    
    (500
    )
    
    
    Total
    
    $
    142,652
    
    
    $
    (37,980
    )
    
    $
    104,672June 30, 2010Customer relationships
    
    $
    72,800
    
    
    $
    (16,381
    )
    
    $
    56,419Non-compete agreements
    
    
    8,835
    
    
    
    (8,623
    )
    
    
    212Tradenames
    
    
    500
    
    
    
    (417
    )
    
    
    83Total
    
    $
    82,135
    
    
    $
    (25,421
    )
    
    $
    56,714
  Year ending June 30,2012
    
    $
    13,2892013
    
    
    13,2892014
    
    
    11,0732015
    
    
    8,6932016
    
    
    8,598Thereafter
    
    
    49,730Total
    
    $
    104,672
 (9) LONG-TERM DEBT
  Acquisitions)
    F-20




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
    Applicable Margin for
    
    
    Applicable Margin forLevel
    
    Leverage Ratio
    
    LIBOR Advances
    
    
    Base Rate AdvancesI
    
    Greater than or equal to 3.25 to 1.00
    
    
    4.50
    %
    
    
    3.50
    %II
    
    Greater than or equal to 2.50 to 1.00 but less than 3.25 to 1.00
    
    
    4.00
    %
    
    
    3.00
    %III
    
    Greater than or equal to 1.75 to 1.00 but less than 2.50 to 1.00
    
    
    3.75
    %
    
    
    2.75
    %IV
    
    Less than 1.75 to 1.00
    
    
    3.50
    %
    
    
    2.50
    %
   Guarantees
  Debt issuance costs
  Debt covenants
  Leverage ratio:
  F-21




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 Fixed-charge coverage ratio:
  Leverage Ratio
    
    Maximum Annual Dividend Payment≥ 3.5x
    
    $
    < 3.5x but ≥ 2.5x
    
    $
    25,000<,2.5x but ≥ 1.5x
    
    $
    35,000<1.5x
    
    $
    45,000
    Redemption rights
   Year
    
    Redemption Price2013
    
    
    105.125
    %2014
    
    
    102.563
    %2015 and thereafter
    
    
    100.000
    %
   F-22




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
  Interest rate derivatives
     (10) INCOME TAXES
   Year Ended June 30,2011
    
    
    2010
    
    
    2009Federal income taxes  current
    
    $
    
    
    
    $
    
    
    
    $
    Federal income taxes  deferred
    
    
    10,140
    
    
    
    3,556
    
    
    
    (1,806
    )Provision for federal income taxes
    
    
    10,140
    
    
    
    3,556
    
    
    
    (1,806
    )State income taxes  current
    
    
    1,449
    
    
    
    755
    
    
    
    (247
    )State income taxes  deferred
    
    
    953
    
    
    
    512
    
    
    
    (268
    )Provision for state income taxes
    
    
    2,402
    
    
    
    1,267
    
    
    
    (515
    )Provision/(benefit) for income taxes
    
    $
    12,542
    
    
    $
    4,823
    
    
    $
    (2,321
    )
   F-23




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
  Year Ended June 30,2011
    
    
    2010
    
    
    2009Expected provision at statutory rate of 34%
    
    $
    2,566
    
    
    $
    (48
    )
    
    $
    (4,053
    )Increase due to:Non-deductible stock-based compensation
    
    
    7,824
    
    
    
    6,177
    
    
    
    2,158State income taxes, net of federal benefit
    
    
    1,564
    
    
    
    786
    
    
    
    (248
    )Transactions costs not deductible for tax purposes
    
    
    294
    
    
    
    385
    
    
    
    Non-taxable gain on bargain purchase
    
    
    
    
    
    
    (3,078
    )
    
    
    Other, net
    
    
    294
    
    
    
    601
    
    
    
    (178
    )Provision/(benefit) for income taxes
    
    $
    12,542
    
    
    $
    4,823
    
    
    $
    (2,321
    )
   Year Ended June 30,2011
    
    
    2010Deferred income tax assetsNet operating loss carry forwards
    
    $
    48,545
    
    
    $
    37,907Alternate minimum tax credit carryforwards
    
    
    78
    
    
    
    78Deferred revenue
    
    
    13,655
    
    
    
    8,752Unrealized loss on interest rate swaps
    
    
    
    
    
    
    223Accrued expenses
    
    
    3,030
    
    
    
    676Other liabilities
    
    
    1,775
    
    
    
    354Allowance for doubtful accounts
    
    
    826
    
    
    
    1,168Other
    
    
    2
    
    
    
    1Total deferred income tax assets
    
    
    67,911
    
    
    
    49,159Deferred income tax liabilitiesProperty and equipment
    
    
    33,804
    
    
    
    23,942Intangible assets
    
    
    34,515
    
    
    
    12,649Investment in unconsolidated subsidiary
    
    
    4,164
    
    
    
    Total deferred income tax liabilities
    
    
    72,483
    
    
    
    36,591Less: Valuation allowance
    
    
    (407
    )
    
    
    Net deferred income tax (liability)/assets
    
    $
    (4,979
    )
    
    $
    12,568
  Equity
  F-24




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
    (11) ACCRUED LIABILITIES
  Year Ended June 30,2011
    
    
    2010Accrued compensation and benefits
    
    $
    3,451
    
    
    $
    3,488Accrued property and equipment purchases
    
    
    4,592
    
    
    
    2,419Network expense accruals
    
    
    1,375
    
    
    
    349Accrued income taxes
    
    
    834
    
    
    
    535Other accrued taxes
    
    
    3,000
    
    
    
    3,216Deferred lease obligations
    
    
    1,822
    
    
    
    425Other accruals
    
    
    7,379
    
    
    
    6,720Total
    
    $
    22,453
    
    
    $
    17,152
 (12) EQUITY
    F-25




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
       Spin-Off of Business Units
 Spin-Off of
Business Units
   F-26




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 (13) STOCK COMPENSATION
    As of June 30,Common Unit Class
    
    2011
    
    
    2010(estimated per share value)Class A
    
    $
    0.81
    
    
    $
    0.49Class B
    
    $
    0.58
    
    
    $
    0.28Class C
    
    $
    0.33
    
    
    $
    0.03Class D
    
    $
    0.31
    
    
    
    n/aClass E
    
    $
    0.23
    
    
    
    n/a
     F-27




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
  Class A
    
    
    Class B
    
    
    Class C
    
    
    Class D
    
    
    Class E
    
    
    TotalsBalance at June 30, 2008
    
    
    44,530,655
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,530,655Common units issued
    
    
    5,494,665
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,494,665Common units forfeited
    
    
    (2,162,262
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,162,262
    )Balance at June 20, 2009
    
    
    47,863,058
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,863,058Common units issued
    
    
    
    
    
    
    18,964,500
    
    
    
    3,330,218
    
    
    
    
    
    
    
    
    
    
    
    22,294,718Common units forfeited
    
    
    (424,271
    )
    
    
    (710,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,134,271
    )Balance at June 30, 2010
    
    
    47,438,787
    
    
    
    18,254,500
    
    
    
    3,330,218
    
    
    
    
    
    
    
    
    
    
    
    69,023,505Common units issued
    
    
    
    
    
    
    500,000
    
    
    
    
    
    
    
    32,499,173
    
    
    
    10,445,905
    
    
    
    43,445,078Common units forfeited
    
    
    (341,659
    )
    
    
    (1,506,980
    )
    
    
    (505,000
    )
    
    
    (147,203
    )
    
    
    (155,000
    )
    
    
    (2,655,842
    )Balance at June 20, 2011
    
    
    47,097,128
    
    
    
    17,247,520
    
    
    
    2,825,218
    
    
    
    32,351,970
    
    
    
    10,290,905
    
    
    
    109,812,741
  Year ended June 30,
    
    
    
    
    
    
    Un-vested andCommon Units Vested
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Total Vested
    
    
    OutstandingClass A
    
    
    14,602,642
    
    
    
    12,968,534
    
    
    
    12,573,357
    
    
    
    6,523,678
    
    
    
    46,668,211
    
    
    
    428,917Class B
    
    
    
    
    
    
    
    
    
    
    5,523,680
    
    
    
    4,868,342
    
    
    
    10,392,022
    
    
    
    6,855,498Class C
    
    
    
    
    
    
    
    
    
    
    239,583
    
    
    
    750,267
    
    
    
    989,850
    
    
    
    1,835,368Class D
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,351,970Class E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,290,905Total Vested
    
    
    14,602,642
    
    
    
    12,968,534
    
    
    
    18,336,620
    
    
    
    12,142,287
    
    
    
    58,050,083
    
    
    
    51,762,658
   (14) FAIR VALUE MEASUREMENTS
   F-28




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
  Level
    
    
    June 30, 2011
    
    
    June 30, 2010Liabilities Recorded at Fair Value in the Financial Statements:Interest rate swap liabilities
    
    Level 2
    
    $
    
    
    
    $
    566Stock-based compensation liability
    
    Level 3
    
    
    45,067
    
    
    
    21,556Total liabilities recorded at fair value in the consolidated financial statements
    
    
    
    
    
    $
    45,067
    
    
    $
    22,122
   (15) COMMITMENTS AND CONTINGENCIES
 Capital Leases
  Year ending June 30,2012
    
    $
    1,7692013
    
    
    1,7542014
    
    
    1,7212015
    
    
    1,6812016
    
    
    1,494Thereafter
    
    
    7,298Total minimum lease payments
    
    
    15,717Less amounts representing interest
    
    
    (4,543
    )Less current portion
    
    
    (950
    )Capital lease obligations, less current portion
    
    $
    10,224
  Operating Leases
    F-29




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
  Year ending June 30,2012
    
    $
    23,3532013
    
    
    21,2412014
    
    
    19,2702015
    
    
    18,0422016
    
    
    15,834Thereafter
    
    
    81,059$
    178,799
 Purchase commitments
  Outstanding letters of credit
  Other commitments
   Contingencies
   F-30




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 (16) RELATED-PARTY TRANSACTIONS
  Spin-Off of Business Units,
  Year ended June 30,2011
    
    
    2010OVS
    
    
    ZEN
    
    
    Total
    
    
    OVS
    
    
    ZEN
    
    
    TotalRevenue
    
    $
    4,475
    
    
    $
    508
    
    
    $
    4,983
    
    
    $
    1,436
    
    
    $
    
    
    
    $
    1,436Operating costs
    
    
    404
    
    
    
    
    
    
    
    404
    
    
    
    
    
    
    
    
    
    
    
    Selling, general and administrative expenses
    
    
    161
    
    
    
    99
    
    
    
    260
    
    
    
    564
    
    
    
    
    
    
    
    564Net
    
    $
    3,910
    
    
    $
    409
    
    
    $
    4,319
    
    
    $
    872
    
    
    $
    
    
    
    $
    872
  (17) SEGMENT REPORTING
  
    
    It engages in business activities from which it may earn revenues and incur
expenses.
    
    Its operating results are regularly reviewed by the entitys chief operating
decision maker to make decisions about resources to be allocated to the segment and
assess its performance.
    
    Its discrete financial information is available.
   Acquisitions
  F-31




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
    As of and for the year ended June 30, 2011Corporate/ZB
    
    
    zColo
    
    
    ZFS
    
    
    eliminations
    
    
    TotalRevenue
    
    $
    214,110
    
    
    $
    33,899
    
    
    $
    44,549
    
    
    $
    
    
    
    $
    292,558Intersegment revenue
    
    
    (2,056
    )
    
    
    (3,267
    )
    
    
    
    
    
    
    
    
    
    
    (5,323
    )Revenue from external customers
    
    
    212,054
    
    
    
    30,632
    
    
    
    44,549
    
    
    
    
    
    
    
    287,235Gross profit (revenue less operating costs excluding
depreciation and amortization)
    
    
    158,461
    
    
    
    17,700
    
    
    
    43,152
    
    
    
    (3,606
    )
    
    
    215,707Depreciation and amortization
    
    
    41,521
    
    
    
    5,393
    
    
    
    13,549
    
    
    
    
    
    
    
    60,463Operating income/(loss)
    
    
    38,264
    
    
    
    6,120
    
    
    
    10,796
    
    
    
    (14,092
    )
    
    
    41,088Interest expense
    
    
    (960
    )
    
    
    (225
    )
    
    
    (15
    )
    
    
    (32,214
    )
    
    
    (33,414
    )Other (expense)/income, net
    
    
    (54
    )
    
    
    
    
    
    
    7
    
    
    
    (79
    )
    
    
    (126
    )Earnings from continuing operations before provision for
income taxes
    
    
    37,249
    
    
    
    5,895
    
    
    
    10,788
    
    
    
    (46,384
    )
    
    
    7,548Total assets
    
    
    491,337
    
    
    
    52,161
    
    
    
    211,315
    
    
    
    34,448
    
    
    
    789,261Capital expenditures, net of stimulus grant reimbursements
    
    
    99,062
    
    
    
    1,543
    
    
    
    11,919
    
    
    
    
    
    
    
    112,524
 As of and for the year ended June 30, 2010Corporate/ZB
    
    
    zColo
    
    
    ZFS
    
    
    eliminations
    
    
    TotalRevenue
    
    $
    183,085
    
    
    $
    23,993
    
    
    $
    
    
    
    $
    
    
    
    $
    207,078Intersegment revenue
    
    
    (5,833
    )
    
    
    (1,915
    )
    
    
    
    
    
    
    
    
    
    
    (7,748
    )Revenue from external customers
    
    
    177,252
    
    
    
    22,078
    
    
    
    
    
    
    
    
    
    
    
    199,330Gross profit (revenue less operating costs excluding
depreciation and amortization)
    
    
    131,331
    
    
    
    13,025
    
    
    
    
    
    
    
    (7,714
    )
    
    
    136,642Depreciation and amortization
    
    
    34,225
    
    
    
    4,513
    
    
    
    
    
    
    
    
    
    
    
    38,738Operating income/(loss)
    
    
    27,336
    
    
    
    4,409
    
    
    
    
    
    
    
    (17,920
    )
    
    
    13,825Interest expense
    
    
    (1,130
    )
    
    
    (164
    )
    
    
    
    
    
    
    (17,398
    )
    
    
    (18,692
    )Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,881
    )
    
    
    (5,881
    )Gain on bargain purchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,081
    
    
    
    9,081Other income, net
    
    
    382
    
    
    
    
    
    
    
    
    
    
    
    1,144
    
    
    
    1,526Earnings from continuing operations before provision for
income taxes
    
    
    26,588
    
    
    
    4,245
    
    
    
    
    
    
    
    (30,974
    )
    
    
    (141
    )Total assets
    
    
    397,150
    
    
    
    56,774
    
    
    
    
    
    
    
    111,916
    
    
    
    565,840Capital expenditures, net of stimulus grant reimbursements
    
    
    58,117
    
    
    
    634
    
    
    
    
    
    
    
    
    
    
    
    58,751
  F-32




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 As of and for the year ended June 30, 2009Corporate/ZB
    
    
    zColo
    
    
    ZFS
    
    
    eliminations
    
    
    TotalRevenue
    
    $
    129,282
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    129,282Intersegment revenue
    
    
    (3,943
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,943
    )Revenue from external customers
    
    
    125,339
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,339Gross profit (revenue less
operating costs excluding
depreciation and amortization)
    
    
    95,712
    
    
    
    
    
    
    
    
    
    
    
    (8,165
    )
    
    
    87,547Depreciation and amortization
    
    
    26,554
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,554Operating income/(loss)
    
    
    16,407
    
    
    
    
    
    
    
    
    
    
    
    (13,319
    )
    
    
    3,088Interest expense
    
    
    (1,182
    )
    
    
    
    
    
    
    
    
    
    
    (14,063
    )
    
    
    (15,245
    )Other income, net
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    180
    
    
    
    234Earnings from continuing
operations before provision
for income taxes
    
    
    15,279
    
    
    
    
    
    
    
    
    
    
    
    (27,202
    )
    
    
    (11,923
    )Total assets
    
    
    316,511
    
    
    
    
    
    
    
    
    
    
    
    105,651
    
    
    
    422,162Capital expenditures, net of
stimulus grant reimbursements
    
    
    61,614
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,614
 (18) CONDENSED CONSOLIDATING FINANCIAL INFORMATION
        F-33




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 Condensed Consolidating Balance Sheets
June 30, 2011
 ZayoZayo Group,
    
    
    Colocation,LLC
    
    
    Inc.
    
    
    Eliminations
    
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    24,213
    
    
    $
    1,181
    
    
    $
    
    
    
    $
    25,394Trade receivables, net
    
    
    11,856
    
    
    
    2,127
    
    
    
    
    
    
    
    13,983Due from related parties
    
    
    2,182
    
    
    
    
    
    
    
    (1,995
    )
    
    
    187Prepaid expenses
    
    
    5,517
    
    
    
    871
    
    
    
    
    
    
    
    6,388Deferred income taxes
    
    
    3,343
    
    
    
    
    
    
    
    
    
    
    
    3,343Other current assets
    
    
    640
    
    
    
    5
    
    
    
    
    
    
    
    645Total current assets
    
    
    47,751
    
    
    
    4,184
    
    
    
    (1,995
    )
    
    
    49,940Property and equipment, net
    
    
    486,847
    
    
    
    31,666
    
    
    
    
    
    
    
    518,513Intangible assets, net
    
    
    89,117
    
    
    
    15,555
    
    
    
    
    
    
    
    104,672Goodwill
    
    
    83,796
    
    
    
    24
    
    
    
    
    
    
    
    83,820Debt issuance costs, net
    
    
    11,446
    
    
    
    
    
    
    
    
    
    
    
    11,446Investment in US Carrier
    
    
    15,075
    
    
    
    
    
    
    
    
    
    
    
    15,075Other assets, non-current
    
    
    5,060
    
    
    
    735
    
    
    
    
    
    
    
    5,795Investment in subsidiary
    
    
    45,594
    
    
    
    
    
    
    
    (45,594
    )
    
    
    Total assets
    
    $
    784,686
    
    
    $
    52,164
    
    
    $
    (47,589
    )
    
    $
    789,261Liabilities and members equity:Current liabilitiesAccounts payable
    
    $
    12,287
    
    
    $
    701
    
    
    $
    
    
    
    $
    12,988Accrued liabilities
    
    
    19,122
    
    
    
    3,331
    
    
    
    
    
    
    
    22,453Accrued interest
    
    
    10,627
    
    
    
    
    
    
    
    
    
    
    
    10,627Capital lease obligation, current
    
    
    950
    
    
    
    
    
    
    
    
    
    
    
    950Due to related parties
    
    
    6,364
    
    
    
    221
    
    
    
    (1,995
    )
    
    
    4,590Deferred revenue, current
    
    
    15,341
    
    
    
    323
    
    
    
    
    
    
    
    15,664Total current liabilities
    
    
    64,691
    
    
    
    4,576
    
    
    
    (1,995
    )
    
    
    67,272Capital lease obligations, non-current
    
    
    10,224
    
    
    
    
    
    
    
    
    
    
    
    10,224Long-term debt
    
    
    354,414
    
    
    
    
    
    
    
    
    
    
    
    354,414Deferred revenue, non-current
    
    
    62,704
    
    
    
    1,189
    
    
    
    
    
    
    
    63,893Stock-based compensation liability
    
    
    44,263
    
    
    
    804
    
    
    
    
    
    
    
    45,067Deferred tax liability
    
    
    8,322
    
    
    
    
    
    
    
    
    
    
    
    8,322Other long term liabilities
    
    
    2,724
    
    
    
    
    
    
    
    
    
    
    
    2,724Total liabilities
    
    
    547,342
    
    
    
    6,569
    
    
    
    (1,995
    )
    
    
    551,916Members equity:Members interest
    
    
    255,572
    
    
    
    35,455
    
    
    
    (45,594
    )
    
    
    245,433(Accumulated deficit)/retained earnings
    
    
    (18,228
    )
    
    
    10,140
    
    
    
    
    
    
    
    (8,088
    )Total members equity
    
    
    237,344
    
    
    
    45,595
    
    
    
    (45,594
    )
    
    
    237,345Total liabilities and members equity
    
    $
    784,686
    
    
    $
    52,164
    
    
    $
    (47,589
    )
    
    $
    789,261
  F-34




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 Condensed Consolidating Balance Sheets
June 30, 2010
 ZayoZayo Group,
    
    
    Colocation,LLC
    
    
    Inc.
    
    
    Eliminations
    
    
    TotalAssets:Current assetsCash and cash equivalents
    
    $
    84,967
    
    
    $
    2,897
    
    
    $
    
    
    
    $
    87,864Trade receivables, net
    
    
    9,998
    
    
    
    1,553
    
    
    
    
    
    
    
    11,551Due from related parties
    
    
    1,426
    
    
    
    138
    
    
    
    (938
    )
    
    
    626Prepaid expenses
    
    
    4,083
    
    
    
    727
    
    
    
    
    
    
    
    4,810Deferred income taxes
    
    
    4,060
    
    
    
    
    
    
    
    
    
    
    
    4,060Other current assets
    
    
    332
    
    
    
    2
    
    
    
    
    
    
    
    334Assets of discontinued operations, current
    
    
    3,061
    
    
    
    
    
    
    
    
    
    
    
    3,061Total current assets
    
    
    107,927
    
    
    
    5,317
    
    
    
    (938
    )
    
    
    112,306Property and equipment, net
    
    
    264,791
    
    
    
    33,098
    
    
    
    
    
    
    
    297,889Intangible assets, net
    
    
    39,217
    
    
    
    17,497
    
    
    
    
    
    
    
    56,714Goodwill
    
    
    67,830
    
    
    
    24
    
    
    
    
    
    
    
    67,854Deferred income taxes
    
    
    8,508
    
    
    
    
    
    
    
    
    
    
    
    8,508Debt issuance costs, net
    
    
    9,560
    
    
    
    
    
    
    
    
    
    
    
    9,560Other assets
    
    
    4,027
    
    
    
    839
    
    
    
    
    
    
    
    4,866Investment in subsidiary
    
    
    53,708
    
    
    
    
    
    
    
    (53,708
    )
    
    
    Assets of discontinued operations, non-current
    
    
    8,143
    
    
    
    
    
    
    
    
    
    
    
    8,143Total assets
    
    $
    563,711
    
    
    $
    56,775
    
    
    $
    (54,646
    )
    
    $
    565,840Liabilities and members equity:Current liabilitiesAccounts payable
    
    $
    9,442
    
    
    $
    573
    
    
    $
    
    
    
    $
    10,015Accrued liabilities
    
    
    16,284
    
    
    
    868
    
    
    
    
    
    
    
    17,152Accrued interest
    
    
    7,794
    
    
    
    
    
    
    
    
    
    
    
    7,794Capital lease obligations, current
    
    
    1,673
    
    
    
    
    
    
    
    
    
    
    
    1,673Due to related parties
    
    
    811
    
    
    
    127
    
    
    
    (938
    )
    
    
    Deferred revenue, current portion
    
    
    7,845
    
    
    
    246
    
    
    
    
    
    
    
    8,091Liabilities of discontinued operations, current
    
    
    1,740
    
    
    
    
    
    
    
    
    
    
    
    1,740Total current liabilities
    
    
    45,589
    
    
    
    1,814
    
    
    
    (938
    )
    
    
    46,465Capital lease obligations, non-current
    
    
    11,033
    
    
    
    
    
    
    
    
    
    
    
    11,033Long-term debt
    
    
    247,080
    
    
    
    
    
    
    
    
    
    
    
    247,080Deferred revenue, non-current
    
    
    21,391
    
    
    
    1,214
    
    
    
    
    
    
    
    22,605Stock-based compensation liability
    
    
    21,517
    
    
    
    39
    
    
    
    
    
    
    
    21,556Other long term liabilities
    
    
    2,397
    
    
    
    
    
    
    
    
    
    
    
    2,397Liabilities of discontinued operations, non-current
    
    
    1,568
    
    
    
    
    
    
    
    
    
    
    
    1,568Total liabilities
    
    
    350,575
    
    
    
    3,067
    
    
    
    (938
    )
    
    
    352,704Members equity:Members interest
    
    
    221,374
    
    
    
    49,463
    
    
    
    (53,708
    )
    
    
    217,129(Accumulated deficit)/retained earnings
    
    
    (8,238
    )
    
    
    4,245
    
    
    
    
    
    
    
    (3,993
    )Total members equity
    
    
    213,136
    
    
    
    53,708
    
    
    
    (53,708
    )
    
    
    213,136Total liabilities and members equity
    
    $
    563,711
    
    
    $
    56,775
    
    
    $
    (54,646
    )
    
    $
    565,840
  F-35




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 Condensed Consolidating Statements of Operations
June 30, 2011
 ZayoZayo Group,
    
    
    Colocation,LLC
    
    
    Inc.
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    258,659
    
    
    $
    33,899
    
    
    $
    (5,323
    )
    
    $
    287,235Operating costs and expensesOperating costs, excluding depreciation and amortization
    
    
    57,047
    
    
    
    16,199
    
    
    
    (1,718
    )
    
    
    71,528Selling, general and administrative expenses
    
    
    86,686
    
    
    
    5,594
    
    
    
    (2,434
    )
    
    
    89,846Stock-based compensation
    
    
    23,717
    
    
    
    593
    
    
    
    
    
    
    
    24,310Depreciation and amortization
    
    
    55,071
    
    
    
    5,392
    
    
    
    
    
    
    
    60,463Total operating costs and expenses
    
    
    222,521
    
    
    
    27,778
    
    
    
    (4,152
    )
    
    
    246,147Operating income
    
    
    36,138
    
    
    
    6,121
    
    
    
    (1,171
    )
    
    
    41,088Other income expenseInterest expense
    
    
    (33,189
    )
    
    
    (225
    )
    
    
    
    
    
    
    (33,414
    )Other expense
    
    
    (126
    )
    
    
    
    
    
    
    
    
    
    
    (126
    )Total other expense, net
    
    
    (33,315
    )
    
    
    (225
    )
    
    
    
    
    
    
    (33,540
    )Earnings/(loss) from continuing operations before income
taxes
    
    
    2,823
    
    
    
    5,896
    
    
    
    (1,171
    )
    
    
    7,548Provision for income taxes
    
    
    12,542
    
    
    
    
    
    
    
    
    
    
    
    12,542(Loss)/earnings from continuing operations
    
    
    (9,719
    )
    
    
    5,896
    
    
    
    (1,171
    )
    
    
    (4,994
    )Earnings from discontinued operations, net of income taxes
    
    
    899
    
    
    
    
    
    
    
    
    
    
    
    899Net (loss)/earnings
    
    $
    (8,820
    )
    
    $
    5,896
    
    
    $
    (1,171
    )
    
    $
    (4,095
    )
  F-36




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 Condensed Consolidating Statements of Operations
June 30, 2010
 ZayoZayo Group,
    
    
    Colocation,LLC
    
    
    Inc.
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    183,085
    
    
    $
    23,993
    
    
    $
    (7,748
    )
    
    $
    199,330Operating costs and expensesOperating costs, excluding depreciation and amortization
    
    
    51,754
    
    
    
    10,968
    
    
    
    (34
    )
    
    
    62,688Selling, general and administrative expenses
    
    
    64,266
    
    
    
    4,065
    
    
    
    (2,420
    )
    
    
    65,911Stock-based compensation
    
    
    18,129
    
    
    
    39
    
    
    
    
    
    
    
    18,168Depreciation and amortization
    
    
    34,225
    
    
    
    4,513
    
    
    
    
    
    
    
    38,738Total operating costs and expenses
    
    
    168,374
    
    
    
    19,585
    
    
    
    (2,454
    )
    
    
    185,505Operating income
    
    
    14,711
    
    
    
    4,408
    
    
    
    (5,294
    )
    
    
    13,825Other expenseInterest expense
    
    
    (18,529
    )
    
    
    (163
    )
    
    
    
    
    
    
    (18,692
    )Other income
    
    
    10,607
    
    
    
    
    
    
    
    
    
    
    
    10,607Loss on extinguishment of debt
    
    
    (5,881
    )
    
    
    
    
    
    
    
    
    
    
    (5,881
    )Total other expense, net
    
    
    (13,803
    )
    
    
    (163
    )
    
    
    
    
    
    
    (13,966
    )Earnings/(loss) from continuing operations before income
taxes
    
    
    908
    
    
    
    4,245
    
    
    
    (5,294
    )
    
    
    (141
    )Provision for income taxes
    
    
    4,823
    
    
    
    
    
    
    
    
    
    
    
    4,823(Loss)/earnings from continuing operations
    
    
    (3,915
    )
    
    
    4,245
    
    
    
    (5,294
    )
    
    
    (4,964
    )Earnings from discontinued operations, net of income taxes
    
    
    5,425
    
    
    
    
    
    
    
    
    
    
    
    5,425Net earnings/(loss)
    
    $
    1,510
    
    
    $
    4,245
    
    
    $
    (5,294
    )
    
    $
    461
  F-37




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 Condensed Consolidating Statements of Cash Flows
June 30, 2011
 ZayoZayo Group,
    
    
    Colocation,LLC
    
    
    Inc.
    
    
    TotalNet cash provided by continuing operating activities
    
    $
    83,860
    
    
    $
    13,194
    
    
    $
    97,054Cash flows from investing activities:Purchases of property and equipment
    
    
    (110,981
    )
    
    
    (1,543
    )
    
    
    (112,524
    )Proceeds from sale of equipment
    
    
    28
    
    
    
    
    
    
    
    28Acquisitions, net of cash acquired
    
    
    (183,666
    )
    
    
    
    
    
    
    (183,666
    )Net cash used in investing activities
    
    
    (294,619
    )
    
    
    (1,543
    )
    
    
    (296,162
    )Cash flows from financing activities:Equity contributions
    
    
    36,450
    
    
    
    
    
    
    
    36,450Dividend received/(paid)
    
    
    13,320
    
    
    
    (13,320
    )
    
    
    Proceeds from borrowings
    
    
    103,000
    
    
    
    
    
    
    
    103,000Principal repayments on capital lease obligations
    
    
    (1,732
    )
    
    
    
    
    
    
    (1,732
    )Changes in restricted cash
    
    
    578
    
    
    
    
    
    
    
    578Deferred financing costs
    
    
    (4,106
    )
    
    
    
    
    
    
    (4,106
    )Net cash provided/(used) by financing activities
    
    
    147,510
    
    
    
    (13,320
    )
    
    
    134,190Cash flows from discontinued operations:Operating activities
    
    
    2,622
    
    
    
    
    
    
    
    2,622Investing activities
    
    
    (382
    )
    
    
    
    
    
    
    (382
    )Net cash provided by discontinued operations
    
    
    2,240
    
    
    
    
    
    
    
    2,240Net decrease in cash and cash equivalents
    
    
    (61,009
    )
    
    
    (1,669
    )
    
    
    (62,678
    )Cash and cash equivalents, beginning of year
    
    
    84,967
    
    
    
    2,897
    
    
    
    87,864(Increase)/ decrease in cash and cash equivalents of discontinued operations
    
    
    (973
    )
    
    
    1,181
    
    
    
    208Cash and cash equivalents, end of year
    
    $
    22,985
    
    
    $
    2,409
    
    
    $
    25,394
  F-38




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 June 30, 2010
 ZayoZayo Group,
    
    
    Colocation,LLC
    
    
    Inc.
    
    
    TotalNet cash provided by continuing operating activities
    
    $
    49,310
    
    
    $
    8,890
    
    
    $
    58,200Cash flows from investing activities:Purchases of property and equipment
    
    
    (58,117
    )
    
    
    (634
    )
    
    
    (58,751
    )Acquisitions, net of cash acquired
    
    
    (45,576
    )
    
    
    (50,995
    )
    
    
    (96,571
    )Net cash used in investing activities
    
    
    (103,693
    )
    
    
    (51,629
    )
    
    
    (155,322
    )Cash flows from financing activities:Equity contributions
    
    
    (11,195
    )
    
    
    50,995
    
    
    
    39,800Dividend received/(paid)
    
    
    5,359
    
    
    
    (5,359
    )
    
    
    Proceeds from borrowings
    
    
    276,948
    
    
    
    
    
    
    
    276,948Principal repayments on debt obligations
    
    
    (166,193
    )
    
    
    
    
    
    
    (166,193
    )Principal repayments on capital lease obligations
    
    
    (2,192
    )
    
    
    
    
    
    
    (2,192
    )Change in restricted cash
    
    
    (564
    )
    
    
    
    
    
    
    (564
    )Deferred financing costs
    
    
    (12,353
    )
    
    
    
    
    
    
    (12,353
    )Net cash provided by financing activities
    
    
    89,810
    
    
    
    45,636
    
    
    
    135,446Cash flows from discontinued operations:Operating activities
    
    
    13,923
    
    
    
    
    
    
    
    13,923Investing activities
    
    
    (1,809
    )
    
    
    
    
    
    
    (1,809
    )Net cash provided/(used) by discontinued operations
    
    
    12,114
    
    
    
    
    
    
    
    12,114Net increase in cash and cash equivalents
    
    
    47,541
    
    
    
    2,897
    
    
    
    50,438Cash and cash equivalents, beginning of year
    
    
    38,019
    
    
    
    
    
    
    
    38,019(Increase)/ decrease in cash and cash equivalents of discontinued operations
    
    
    (593
    )
    
    
    
    
    
    
    (593
    )Cash and cash equivalents, end of year
    
    $
    84,967
    
    
    $
    2,897
    
    
    $
    87,864
  F-39




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
 (19) QUARTERLY FINANCIAL DATA (UNAUDITED)
  2011 Quarter EndedSeptember 30
    
    
    December 31
    
    
    March 31
    
    
    June 30
    
    
    TotalRevenue
    
    $
    62,926
    (1)
    
    $
    72,287
    (2)
    
    $
    74,182
    
    
    $
    77,840
    
    
    $
    287,235Operating costs and expenses:Operating costs, excluding depreciation and amortization
    
    
    17,038
    (1)
    
    
    17,904
    (2)
    
    
    18,389
    
    
    
    18,197
    
    
    
    71,528Selling, general and administrative expenses
    
    
    20,284
    (1)
    
    
    23,938
    (2)
    
    
    23,201
    
    
    
    22,423
    
    
    
    89,846Stock-based compensation
    
    
    5,131
    
    
    
    1,859
    
    
    
    21,826
    (3)
    
    
    (4,506
    )            (4)
    
    
    24,310Depreciation and amortization
    
    
    11,809
    
    
    
    15,881
    
    
    
    16,209
    
    
    
    16,564
    
    
    
    60,463Total operating costs and expenses
    
    
    54,262
    
    
    
    59,582
    
    
    
    79,625
    
    
    
    52,678
    
    
    
    246,147Operating income/(loss)
    
    
    8,664
    
    
    
    12,705
    
    
    
    (5,443
    )
    
    
    25,162
    
    
    
    41,088Other income (expense):Interest expense
    
    
    (6,257
    )
    
    
    (9,032
    )
    
    
    (9,004
    )
    
    
    (9,121
    )
    
    
    (33,414
    )Other (expense)/ income, net
    
    
    (161
    )
    
    
    (16
    )
    
    
    69
    
    
    
    (18
    )
    
    
    (126
    )Total other expense, net
    
    
    (6,418
    )
    
    
    (9,048
    )
    
    
    (8,935
    )
    
    
    (9,139
    )
    
    
    (33,540
    )Earnings/(loss) from continuing operations before income taxes
    
    
    2,246
    
    
    
    3,657
    
    
    
    (14,378
    )
    
    
    16,023
    
    
    
    7,548(Provision) for income taxes
    
    
    (2,800
    )
    
    
    (2,094
    )
    
    
    (2,583
    )
    
    
    (5,065
    )
    
    
    (12,542
    )(Loss)/earnings from continuing operations
    
    $
    (554
    )
    
    $
    1,563
    
    
    $
    (16,961
    )
    
    $
    10,958
    
    
    $
    (4,994
    )Earnings/(loss) from discontinued operations, net of income
taxes
    
    
    281
    
    
    
    317
    
    
    
    301
    
    
    
    
    
    
    
    899Net earnings/(loss)
    
    $
    (273
    )
    
    $
    1,880
    
    
    $
    (16,660
    )
    
    $
    10,958
    
    
    $
    (4,095
    )
 (1)
    
    The Company realized an increase in revenue beginning July 1, 2010 as a result
of the acquisition of AGL. As a result of the acquisition the Company incurred additional
operating and selling, general and administrative expenses attributed to the additional
revenues associated with the acquisition.(2)
    
    The Company realized an increase in revenue beginning October 1, 2010 as a result of
the merger with AFS. As a result of the merger the Company incurred additional operating and
selling, general and administrative expenses attributed to the additional revenues associated
with the acquisition.(3)
    
    Stock-based compensation expense increased significantly during the quarter ended
March 31, 2011 as a result of an increase in the estimated value of the common units granted
to the Companys employees and additional units vesting during the quarters. See Note 13 
Stock Compensation.(4)
    
    The Company recorded a reduction to stock-based compensation expense during the
quarter ended June 30, 2011 as a result of the issuance of Class E common units during the
quarter which diluted the value of earlier common unit issuances. See Note 13  Stock
Compensation.  F-40




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##### Table of Contents



ZAYO GROUP, LLC AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED STATEMENTS
(in thousands)
  2010 Quarter EndedSeptember 30
    
    
    December 31
    
    
    March 31
    
    
    June 30
    
    
    TotalRevenue
    
    $
    39,469
    
    
    $
    52,156
    (1)
    
    $
    52,687
    
    
    $
    55,018
    
    
    $
    199,330Operating costs and expenses:Operating costs, excluding depreciation and amortization
    
    
    11,825
    
    
    
    17,150
    (1)
    
    
    16,941
    
    
    
    16,772
    
    
    
    62,688Selling, general and administrative expenses
    
    
    14,873
    
    
    
    17,039
    (1)
    
    
    16,794
    
    
    
    17,205
    
    
    
    65,911Stock-based compensation
    
    
    845
    
    
    
    588
    
    
    
    11,799
    (2)
    
    
    4,936
    (2)
    
    
    18,168Depreciation and amortization
    
    
    8,384
    
    
    
    10,088
    
    
    
    9,889
    
    
    
    10,377
    
    
    
    38,738Total operating costs and expenses
    
    
    35,927
    
    
    
    44,865
    
    
    
    55,423
    
    
    
    49,290
    
    
    
    185,505Operating income/(loss)
    
    
    3,542
    
    
    
    7,291
    
    
    
    (2,736
    )
    
    
    5,728
    
    
    
    13,825Other income (expense):Interest expense
    
    
    (3,570
    )
    
    
    (3,241
    )
    
    
    (4,449
    )
    
    
    (7,432
    )(3)
    
    
    (18,692
    )Other income
    
    
    5
    
    
    
    
    
    
    
    1,001
    
    
    
    9,601
    (4)
    
    
    10,607Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (5,881
    )(3)
    
    
    
    
    
    
    (5,881
    )Total other (expense)/income, net
    
    
    (3,565
    )
    
    
    (3,241
    )
    
    
    (9,329
    )
    
    
    2,169
    
    
    
    (13,966
    )(Loss)/earnings from continuing operations before income taxes
    
    
    (22
    )
    
    
    4,051
    
    
    
    (12,065
    )
    
    
    7,895
    
    
    
    (141
    )Provision for income taxes
    
    
    651
    
    
    
    1,127
    
    
    
    210
    
    
    
    2,835
    
    
    
    4,823(Loss)/earnings from continuing operations
    
    $
    (673
    )
    
    $
    2,924
    
    
    $
    (12,275
    )
    
    $
    5,060
    
    
    $
    (4,964
    )Earnings from discontinued operations, net of income taxes
    
    
    2,271
    
    
    
    1,130
    
    
    
    1,490
    
    
    
    534
    
    
    
    5,425Net earnings/(loss)
    
    $
    1,598
    
    
    $
    4,054
    
    
    $
    (10,785
    )
    
    $
    5,594
    
    
    $
    461
 (1)
    
    The Company realized an increase in revenue beginning September 9, 2009 as a
result of the acquisition of Fibernet. As a result of the acquisition the Company incurred
additional operating and selling, general and administrative expenses attributed to the
additional revenues associated with the acquisition.(2)
    
    Stock-based compensation expense increased significantly during the quarters ended
March 31, 2010 and June 30, 2010 as a result of an increase in the value of the common units
granted to the Companys employees and additional units vesting during these quarters. See
Note 13  Stock Compensation.(3)
    
    Interest expense increased during the quarter ended June 30, 2010 primarily as a
result of the notes offering which closed on March 12, 2010. Interest expense increased as a
result of the higher interest rates on the notes as compared to the senior debt which was
repaid on March 12, 2010 and as a result of the larger debt balance during the quarter. As a
result of paying off the senior notes with the proceeds from the notes offering, the Company
wrote off $5,881 in unamortized debt issuance costs during the quarter ended March 31, 2010.
See Note 9  Long Term Debt.(4)
    
    During the year ended June 30, 2010 the Company recognized a gain on bargain
purchase of $9,081 associated with the Fibernet acquisition. See Note 3  Acquisitions.  F-41




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##### Table of Contents



Signatures
 th
 ZAYO GROUP, LLCBy:
    /s/ Ken desGarennesKen desGarennesChief Financial Officer  Signature
    
    Title
    
    Date/s/ Dan Caruso

Dan Caruso
    
    Chief Executive Officer, Director
    
    September 9, 2011/s/ Gillis Cashman

Gillis Cashman
    
    Director
    
    September 9, 2011/s/ Michael Choe

Michael Choe
    
    Director
    
    September 9, 2011/s/ Rick Connor

Rick Connor
    
    Director
    
    September 9, 2011/s/ John Downer

John Downer
    
    Director
    
    September 9, 2011/s/ John Siegel

John Siegel
    
    Director
    
    September 9, 2011